Flat-rate fuel expenses

What it means

Flat-rate fuel expenses are a simplified way for a sole trader or company to claim fuel costs as tax-deductible expenses for a vehicle included in business assets or leased and also used privately. Instead of proving actual consumption from a mileage log, it claims 80 % of documented spending on fuel.

The regime is set out in the Income Tax Act and can be used for at most four vehicles. For the same vehicle it cannot be combined within one tax period with claiming actual expenses from a mileage log. The remaining 20 % represents a flat-rate private share that is not deductible.

The flat rate covers fuel only. Other vehicle costs, such as depreciation, leasing, insurance, servicing or motorway vignettes, are assessed separately and reduced for private use under the rules of the Act. Nor does the flat rate change anything for VAT, where separate deduction rules apply.

How it works in practice

The flat rate suits cases where a car is used alternately for business and privately and keeping a detailed mileage log would be disproportionately demanding. A typical case is a sole trader with one car or a small s. r. o. whose director also drives home. Administration is saved, but only 80 % of fuel costs will be deductible.

Even with the flat rate you need receipts for fuel purchases and must know which vehicle was filled. Receipts without vehicle identification are weak evidence in an audit. We recommend a company fuel card assigned to a specific car, or writing the registration number on every receipt.

For company cars provided to employees, the flat rate should be assessed together with taxation of the non-cash benefit. If an employee uses the car privately and the company pays for fuel for private trips as well, further taxable income arises. Combining the flat rate, the 1 % benefit and VAT needs a well-thought-out set-up.

What to watch out for

Do not confuse this with VAT. Since 2025 the input VAT limit on passenger cars of 50 % applies, which has nothing to do with the 80 % income tax flat rate. Both rules apply in parallel and each has its own conditions. Merging them into a single percentage is a mistake.

The flat rate is chosen for the whole tax period. If a company starts keeping a mileage log during the year and wants to switch to actual expenses, this is generally not possible for the same car in that year. It is best to decide on the method at the start of the year or when the vehicle is brought into use.