A long-term car lease for a sole proprietor or a limited liability company (s.r.o.) can be a practical way to secure a vehicle without tying up a large amount of capital in its purchase. However, when making this decision, it is not enough to simply compare the monthly lease price. It is also important to consider how the costs will affect taxes, whether the business owner is a VAT payer, and how the vehicle will be used.

The difference between a sole proprietor and a limited liability company is particularly significant when it comes to how expenses are claimed. A sole proprietor, for example, can use a flat-rate expense deduction, under which they do not claim individual car rental costs separately. The situation is different for verifiable expenses. A limited liability company (S.r.o.) records costs in its accounting records and evaluates them according to tax deductibility rules.

VAT is a separate issue. As of January 1, 2026, new rules apply to VAT deductions for passenger vehicles, including those used under a long-term lease agreement. In cases of mixed use, the basic rule is a 50% deduction, while a 100% deduction is subject to specific conditions.

Long-Term Car Leases for Self-Employed Individuals: How Do Tax Deductions Work?

For self-employed individuals, the first step is to determine which method of claiming expenses the business owner uses.

If the self-employed individual claims actual, verifiable expenses, rent for leased property may constitute a tax-deductible expense provided the statutory conditions are met. The Financial Administration states that rental expenses for movable property are claimed in accordance with the rules of the Income Tax Act. The timing of payment is also an important factor when it comes to rent.

In the case of a long-term car lease, the monthly lease payment may therefore be a relevant business expense for an entrepreneur if it is related to their business activities and the conditions for tax deductibility are met.

Be Mindful of Flat-Rate Expenses

For a self-employed individual, a key question is whether to claim actual or flat-rate expenses.

For flat-rate expenses amounting to 60% of income, up to a maximum of €20,000 per year, this amount includes all tax-deductible expenses except for statutory insurance premiums and contributions. Separate car lease payments are therefore not included in the flat-rate amount.

This can be a key factor when deciding on a long-term lease.

Long-Term Car Lease for a Limited Liability Company (s.r.o.): What Counts as an Expense?

The situation is different for a limited liability company (s.r.o.). The company maintains accounting records and assesses tax-deductible expenses based on whether they were demonstrably incurred to generate, secure, and maintain taxable income.

If the company uses a leased vehicle for business purposes, the costs associated with the lease may be tax-deductible provided the legal conditions are met. However, for assets that may be used for personal purposes, the law also provides for a proportional deduction based on the manner of use.

What an entrepreneur can address regarding a car

Depending on the specific contract and how the vehicle is used, this may include, for example:

• rental fees,
• fuel,
• service and maintenance,
• tires,
• parking fees,
• toll fees,
• insurance,
• other operating costs.

However, for each item, you must assess its tax treatment and relevance to your business separately.

Self-Employed Individual vs. LLC: What’s the Biggest Difference?

At first glance, a long-term car lease for a sole proprietor and a limited liability company (s.r.o.) may seem almost identical. The difference, however, lies primarily in how expenses are recorded and claimed.

Self-Employed Individual

A sole proprietor chooses between flat-rate and actual, verifiable expenses.

With actual expenses, car leasing can be included in tax-deductible expenses if it meets the legal requirements.

With flat-rate expenses, the situation is simpler, but individual car-related costs are no longer added separately to the 60% flat rate.

LLC

The company records individual expenses and assesses them for tax deductibility. When a vehicle is also used for personal purposes, attention must be paid to the ratio of business to non-business use, as well as to any additional rules applicable to the specific situation.

VAT Deduction for Long-Term Car Leases in 2026

VAT is an area that requires particular attention in 2026.

From January 1, 2026, through June 30, 2028, a 50% flat-rate VAT deduction applies to selected passenger vehicles used for purposes other than business. This rule also applies to passenger vehicles used under a long-term lease agreement.

What does a 50% deduction mean?

If a business owner is a VAT payer and uses a leased passenger car for both business and personal purposes, the VAT on the lease service is deductible at a rate of 50% provided certain conditions are met.

The same rule applies, where relevant, to goods and services related to the vehicle, such as fuel and maintenance.

It is therefore important for business owners to distinguish between the rental price excluding VAT, the VAT amount, and the actual cost after applying the available deduction.

When is it possible to claim a 100% VAT deduction for a car?

A 100% deduction is not automatic simply because the car is registered to the business or is used by the business owner.

For a passenger vehicle used exclusively for business purposes, a 100% VAT deduction may be possible, but certain legal conditions must be met. Starting in 2026, this regime will require, among other things, electronic trip logs and, in relevant cases, notification to the tax office.

What does a business owner need to keep track of?

For a 100% deduction, it is necessary to be able to prove the vehicle’s exclusive business use.

The electronic records must include information about the vehicle and individual trips, such as the date and time of the trip, the purpose of the trip, the starting and ending locations, and the number of kilometers traveled.

In July 2026, the Financial Administration also announced an audit campaign focused specifically on the correct application of the 100% deduction for passenger vehicles.

This is an important signal for business owners: the 100% VAT deduction is not just an administrative checkbox on a form. It must be supported by the actual use of the vehicle and proper records.

Long-Term Car Leasing and the Approval Process: Self-Employed Individuals vs. Limited Liability Companies

Tax rules are only one part of the decision-making process. The other is the approval of the lease itself.

The lessor needs to assess whether the client is capable of fulfilling their obligations throughout the entire lease term. The required documents may therefore vary depending on the type of client, the length of time in business, the vehicle requested, or the provider’s internal rules.

What might be important for a self-employed individual?

For a self-employed individual, the following factors may play a role, for example:

• the length of time in business,
• income and its stability,
• available accounting or tax documents,
• business history,
• the desired lease term,
• vehicle price.

What factors might be important for a limited liability company (s.r.o.)?

For a limited liability company (s.r.o.), the following may be considered, for example:

• the company’s age and history,
• financial performance,
• revenue,
• payment history,
• financial situation,
• required number of vehicles,
• lease term.

However, the specific approval conditions always depend on the provider and the specific offer.

Which is more advantageous: a long-term car lease for a sole proprietor or a limited liability company (s.r.o.)?

There is no one-size-fits-all answer. The decision depends on how you run your business, your income, whether you’re a VAT payer, and how you’ll use the vehicle.

A Practical Perspective

Self-employed individual with flat-rate expenses:
A long-term lease can be particularly attractive due to the predictable monthly costs and services included in the lease. However, the lease payment itself cannot be added to flat-rate expenses.

Self-employed individual with actual expenses:
Rent may qualify as a tax-deductible expense if certain conditions are met. It is important to maintain the necessary records and be able to demonstrate the connection between the expenses and business operations.

Limited Liability Company (s.r.o.):
Rent and related costs are accounted for in the company’s books. If a vehicle is also used for personal purposes, the relevant rules and the proportional allocation of costs must be taken into account.

VAT payer:
Additionally, the manner of vehicle use must be addressed from a VAT perspective. For mixed-use of a personal vehicle, a 50% flat-rate deduction will apply starting in 2026, while a 100% deduction requires compliance with statutory conditions.

Conclusion: More Than Just the Monthly Cost Matters When It Comes to Company Cars

Long-term car leasing for sole proprietors and limited liability companies (s.r.o.) can be a practical solution for business mobility. However, the difference lies in how the costs are accounted for and treated for income tax and VAT purposes.

For self-employed individuals, the key decision is between flat-rate and actual expenses. For limited liability companies (s.r.o.), proper accounting and assessment of the vehicle’s business use are essential. Additionally, VAT payers should anticipate new rules for passenger vehicles starting in 2026.

Payless GigaRent offers business owners the option to acquire a vehicle through a long-term lease without having to purchase it. When selecting a specific vehicle, it is therefore worth considering not only the monthly price but also the entire package of services, terms, and expected costs.

Before signing the contract, it’s advisable to consult with an accountant or tax advisor about your specific situation, especially if you’re dealing with a 100% VAT deduction or a combination of business and personal use of the vehicle.

FAQ: Long-Term Car Leasing for Sole Proprietors and Limited Liability Companies

Can a sole proprietor claim car lease payments as a tax deduction?

Yes, when claiming actual, verifiable expenses, the lease payment for a leased vehicle may be a tax-deductible expense provided the legal conditions are met. However, under the flat-rate expense method, individual car-related costs are not claimed separately.

Can a limited liability company (s.r.o.) claim car rental as a tax-deductible expense?

Provided the conditions are met, the rental fee may be a tax-deductible expense for the company. It must be a verifiable expense related to generating, securing, or maintaining taxable income.

How much VAT can I deduct for a long-term car lease?

For a passenger vehicle also used for private purposes, a flat-rate VAT deduction of 50% applies from January 1, 2026, through June 30, 2028, under specified conditions. A 100% deduction is possible if the conditions for exclusive business use are met.

Do I need a logbook for a 100% VAT deduction?

Yes. Under the 100% deduction regime, the taxpayer must be able to prove the vehicle’s exclusive business use through electronic records. The Financial Administration also notes that a mere declaration of the vehicle’s business use is not sufficient.

Is it easier to get approval for a lease as a sole proprietor or as a limited liability company (s.r.o.)?

It cannot be generally stated that one type of business owner always has an easier time getting approval. The provider may evaluate the client’s business history, financial results, income, creditworthiness, and other factors.