A company car is a widespread solution, whether as a benefit, a part of business image-building, or simply a tool for operational tasks. However, understanding the tax regulations related to company cars is crucial to ensure their operation is both lawful and cost-effective.
In this article, we provide an overview of the most important aspects of company car taxation.
1. What is the Company Car Tax?
The company car tax is a tax imposed on passenger cars for which the taxpayer has claimed expenses or depreciation.
Which vehicles are subject to the company car tax?
The obligation to pay the company car tax applies to passenger cars, as defined by the Personal Income Tax Act. According to this definition, a passenger car is a motor vehicle equipped with four or three rubber tires, capable of transporting up to eight adult persons, including the driver. However, environmentally friendly vehicles, such as purely electric and zero-emission cars, are exempt from this tax obligation.
Who is liable to pay the tax?
As a general rule, the tax liability is linked to the owner of the vehicle. For vehicles listed in the official vehicle registry, the obligation falls on the registered owner. If the vehicle was acquired through financial leasing, the lessee is responsible for paying the company car tax.
For passenger cars not registered in Hungary (e.g., with foreign license plates), the tax liability falls on the individual or organization claiming expenses for using the car.
How is the tax calculated?
The amount of tax is influenced by two factors:
- The vehicle’s performance (measured in kilowatts), and
- Its environmental classification.
The current tax rates are summarized in the following table:
| power of the engine of the vehicle (kW) | environmental class marking | ||
| in case of “0”-“4” class marking | in case of “6”-“10” class marking | in case of “5”; “14-15” class marking | |
| 0-50 | 30 500 Ft | 16 000 Ft | 14 000 Ft |
| 51-90 | 41 000 Ft | 20 000 Ft | 16 000 Ft |
| 91-120 | 61 000 Ft | 41 000 Ft | 20 000 Ft |
| above 120 | 81 000 Ft | 61 000 Ft | 41 000 Ft |
When does the obligation arise and cease?
The tax liability begins with the acquisition of ownership of the passenger car. It applies from the first day of the month following the acquisition or financial leasing and lasts until the last day of the month when the taxpayer sells, gifts, or returns the vehicle to the lessor. The obligation also ceases if the vehicle is unlawfully disposed of or destroyed.
Deadlines and payment obligations
The company car tax must be declared and paid quarterly by the 20th day of the month following the respective quarter. Under self-assessment rules, businesses are responsible for calculating the tax and ensuring timely and accurate payment.
2. VAT Deduction Rules
The VAT Act provides specific rules regarding the deduction of input VAT for the acquisition and maintenance of passenger cars. As a general rule, the following VAT cannot be deducted:
- Input VAT charged on passenger cars,
- VAT on fuel required for operating the passenger car,
- VAT on products required for passenger the car’s maintenance and operation,
- 50% of the VAT on services related to the maintenance and operation of the passenger car,
- 50% of the VAT on leasing passenger cars.
Notably, the above-mentioned 50% VAT deduction rule can be applied without supporting documentation. However, if the business can substantiate that the vehicle is used more than 50% for VAT-able activities, it may claim a VAT deduction exceeding 50%, provided proper records are kept.
