Budget Consolidation 2026 impacts VAT, too

As part of the budget consolidation 2026, the National Council of the Slovak Republic passed new regulations that should help with consolidation of the country’s budget and decrease 2026 deficit.

With respect to VAT, from 1 January 2026, consumable goods (e.g. sodas, chocolate, sweets, jams) shall be subject to an increased 23% VAT rate (instead of current 19%). The change does not impact the sugar as standalone commodity.

Between 1 January 2026 and 30 June 2028 the VAT deduction from purchase of personal motor vehicles shall be limited to 50%, if the car is not used exclusively for business purposes. This limitation of VAT deduction concerns also lease as well as all goods and services linked to such vehicle. Until end of 2025, it is still possible to deduct VAT according to the actual VAT recovery ratio of the business and other rules for use of personal motor vehicle.

The use of personal motor vehicle exclusively for business purposes, and any change, must be reported to the tax authorities. To be eligible for 100% VAT deduction, detailed logbook must be kept and shall be provided to the tax authorities upon request.

The non-deducted VAT shall not be considered as tax deductible expense for income tax purposes.

Key takeaway / recommendation

Personal use of company vehicles is popular benefit in Slovakia, the negatives of limitation of VAT deduction and the administration pose unexpected burden and increase of staff and carpark expenses. The current policies should be reviewed and revised accordingly to limit costs and tax audit risk.