Car in Business for OSVČ: Flat-Rate vs. Actual Expenses

For most Czech self-employed individuals, a car is an absolutely essential work tool. Whether you drive to clients, haul materials, or commute to job sites, vehicle running costs can make up a significant portion of your expenses. The good news is that the Income Tax Act offers several ways to deduct these costs from your tax base. The bad news? Choosing the right method isn't always straightforward, and making the wrong call can cost you thousands of crowns a year.

In this guide, we'll take a detailed look at all the options for claiming vehicle expenses, compare the flat-rate transport allowance with actual expenses, and walk through concrete examples showing when each approach pays off. We draw on currently applicable legislation, in particular Act No. 586/1992 Coll., on Income Taxes (hereinafter the ITA) and Decree No. 573/2025 Coll. on travel reimbursements for 2026.

Flat-rate transport allowance: simplicity first

The flat-rate transport allowance is governed by Section 24(2)(zt) of the ITA. It's a fixed amount you can deduct for each calendar month in which you used the vehicle for business purposes.

Key parameters of the flat-rate transport allowance

| Parameter | Value | |----------|---------| | Full allowance (vehicle used exclusively for business) | CZK 5,000 / month | | Reduced allowance (vehicle used for both business and personal purposes) | CZK 4,000 / month (80% of CZK 5,000) | | Maximum number of vehicles | 3 per tax year | | Maximum annual deduction (full) | CZK 60,000 (12 x CZK 5,000) | | Maximum annual deduction (reduced) | CZK 48,000 (12 x CZK 4,000) |

Conditions for claiming the flat-rate allowance

To claim the flat-rate transport allowance, you must meet the following conditions:

• You actually use the vehicle to achieve, secure, and maintain taxable income.
• You must not lend the vehicle to another person in the given month (except for business trips by employees and cooperating persons).
• During the tax year, you cannot switch from the flat-rate allowance to actual expenses or vice versa.
• If you also use the vehicle for personal purposes, you may only claim the reduced allowance of CZK 4,000.

What the allowance covers and what it doesn't

The flat-rate transport allowance replaces the following actual expenses:

• Fuel (petrol, diesel, CNG, electricity for charging)
• Parking fees
• Motorway vignettes and tolls (where related to routine business travel)

The flat-rate transport allowance does not cover the following costs, which you can claim separately alongside it:

• Vehicle depreciation (if the vehicle is included in business assets)
• Vehicle insurance (third-party liability and comprehensive insurance)
• Repairs and maintenance (servicing, parts, tyres, MOT)
• Road tax (if applicable)
• Lease payments (in the case of a finance lease)

Flat-rate allowance and VAT

If you are a VAT payer, a special rule applies: you can claim the flat-rate transport allowance and at the same time reclaim input VAT on fuel purchases. You will, however, need to keep records of fuel purchases and hold proper tax documents. When using the reduced allowance (CZK 4,000), you may only reclaim VAT on 80% of the fuel purchased.

Actual expenses: higher deductions, but more paperwork

The second option is to claim your actual, documented vehicle running costs. This approach is more administratively demanding, but if you cover a lot of kilometres or own an older vehicle with higher repair costs, it can deliver significantly greater tax savings.

What can be claimed as actual vehicle expenses

Mileage log – a must for actual expenses

If you claim actual expenses, you must keep a mileage log. The mileage log serves as evidence for the tax authority that your vehicle costs genuinely relate to business activity.

A detailed guide to keeping a mileage log can be found in our dedicated article on mileage logs. Here's a quick summary of the mandatory entries:

• Date of journey
• Destination and purpose (ideally the client's name or a description of the business meeting)
• Number of kilometres driven (odometer reading at the start and end)
• Journey type (business / personal)

Apportioning expenses for mixed use

If you use the vehicle for both business and personal purposes, you must prorate your actual expenses based on the ratio of business to personal kilometres, as recorded in your mileage log.

Vehicle depreciation

If your vehicle is included in business assets, you can claim depreciation. A passenger car falls into depreciation group 2, with a depreciation period of 5 years. You can choose between straight-line and accelerated depreciation — but once chosen, the method cannot be changed during the depreciation period.

Straight-line depreciation

| Year | Depreciation rate | Depreciation on CZK 400,000 | |----------------|---------------|-------------------------| | Year 1 | 11% | CZK 44,000 | | Year 2 | 22.25% | CZK 89,000 | | Year 3 | 22.25% | CZK 89,000 | | Year 4 | 22.25% | CZK 89,000 | | Year 5 | 22.25% | CZK 89,000 | | Total | 100% | CZK 400,000 |

Accelerated depreciation

| Year | Coefficient | Depreciation on CZK 400,000 | |----------------|-----------|-------------------------| | Year 1 | 5 | CZK 80,000 | | Year 2 | 6 | CZK 128,000 | | Year 3 | 6 | CZK 96,000 | | Year 4 | 6 | CZK 64,000 | | Year 5 | 6 | CZK 32,000 | | Total | – | CZK 400,000 |

Depreciation and the flat-rate transport allowance

Important note: you can claim vehicle depreciation alongside the flat-rate transport allowance. The allowance only replaces running costs (fuel, parking), not depreciation. However, if you claim the reduced allowance of CZK 4,000 (mixed use), you must also reduce your depreciation claim to 80%.

Personal vehicle vs. vehicle in business assets

Whether your vehicle is included in business assets or used as a personal car for business purposes has a significant impact on your available tax deduction options.

Basic reimbursement for use of a personal vehicle

If your vehicle is not included in business assets but you still use it for business, you can — in addition to the actual cost of fuel — also claim a basic reimbursement for each kilometre driven. For 2026, the rate under Decree No. 573/2025 Coll. is:

• Passenger car: CZK 5.90/km
• Two-wheeled vehicles and tricycles: CZK 1.60/km

The big comparison: flat-rate vs. actual expenses — when to choose which?

Now for the key question: which option is better for you? It depends on several factors.

When the flat-rate transport allowance makes sense

• You drive relatively few kilometres (up to around 1,000 km per month)
• Your vehicle is older and fully depreciated, with low repair costs
• You don't want to deal with the admin burden of keeping a mileage log
• You use the car for personal purposes too and don't want to worry about apportioning costs

When actual expenses make sense

• You drive a lot of kilometres (over 1,500 km per month)
• You have a new vehicle with high depreciation (accelerated depreciation in the early years)
• Your vehicle requires frequent repairs or servicing
• You are paying lease instalments (which can be substantial)
• You are a VAT payer and want to reclaim input tax on all costs

Company car and employees

If you are an OSVČ with employees who use a company vehicle for business trips, the same rules apply — you as the business owner claim the expenses. The employee does not receive a per-km reimbursement (that only applies when they use their own personal vehicle), but you deduct the running costs of the company vehicle.

If an employee also uses the company car for personal purposes, you must add 1% of the vehicle's purchase price to their taxable income each month as a non-monetary benefit (minimum CZK 1,000 per month).

Car on a lease vs. car purchased on credit

Finance lease

With a finance lease, you deduct the lease instalments (not depreciation — the vehicle is depreciated by the leasing company). At the end of the lease, you purchase the vehicle at its residual value and can then include it in your business assets.

Conditions for the lease to be tax-deductible:

• Minimum lease term of 54 months (for depreciation group 2)
• Ownership must transfer to the lessee at the end of the lease
• The purchase price must not exceed the residual value under straight-line depreciation

Loan (hire purchase)

When buying a vehicle on a loan, the car is yours from the outset — you include it in your business assets and depreciate it. Your tax-deductible expenses are depreciation and loan interest (not the principal repayments).

Road tax — does it still apply to you?

Since 2022, road tax is only payable on vehicles with a maximum permitted weight exceeding 3.5 tonnes. If you own a standard passenger car or a van up to 3.5 tonnes, you do not pay road tax. This change significantly reduced the administrative burden for most OSVČ.

The most common mistakes when claiming vehicle expenses

A practical decision tree

Not sure which option to go with? Work through this simple decision process:

1. Are you claiming flat-rate percentage expenses? (60% for tradespeople, 80% for farmers, etc.) If yes, vehicle costs are included in the flat rate. End of story.
2. Is the vehicle in your business assets? If not, you can claim the basic per-km reimbursement of CZK 5.90 + fuel, or the flat-rate transport allowance.
3. Do you drive more than 1,200 business kilometres per month? If yes, consider actual expenses.
4. Do you have a new vehicle with high depreciation? Depreciation can be claimed under both options, but with actual expenses you additionally deduct fuel and other costs.
5. Do you find mileage log admin off-putting? If yes, the flat-rate allowance is clearly the more convenient choice.

Summary: overview table of all options

| Criterion | Flat-rate transport allowance | Actual expenses | Personal vehicle (per-km reimbursement) | |-----------|-------------------|-----------------|-------------------------------| | Monthly running cost deduction | CZK 5,000 / CZK 4,000 | Based on actual costs | CZK 5.90/km + fuel | | Mileage log required | No | Yes | Yes | | Depreciation | Yes (alongside allowance) | Yes | No | | Insurance, repairs | Yes (alongside allowance) | Yes | No | | Administrative burden | Low | High | Medium | | Best suited for | Fewer km, simplicity | High km, new vehicle | Vehicle outside business assets |

Conclusion

Choosing how to claim your vehicle expenses is one of the most important tax decisions you make as an OSVČ each year. The flat-rate transport allowance offers simplicity and predictability — you know exactly how much you'll deduct. Actual expenses can deliver greater savings, but require careful record-keeping. And if the vehicle isn't in your business assets, the basic per-km reimbursement can turn out to be surprisingly advantageous.

The key is always to run the numbers for both options before the year begins and choose the one that delivers the highest tax saving at an acceptable administrative cost.