New legislation in Lithuania amends the Law on VAT to provide possibility for VAT deduction on purchased electric cars. Input VAT deduction will be permissible for passenger (M1 category) electric cars of value up to EUR 50 thousand (including VAT).
The amendment (passed by the Parliament on 3 November 2022, and signed by the President on 16 November 2022) is effective as of 1 January 2023.
Reminder: In other cases Lithuanian VAT deduction on acquired passenger cars is only permissible if the cars are supplied, rented out or used for provision of paid passenger transport services. Limitation on input VAT deductions is not applicable for passenger cars classified as special-purpose motor vehicles under legal acts governing the classification and coding of vehicles.
KPMG observation
This change aims to incentivise companies to purchase electric vehicles instead of more polluting regular cars. By increasing the percentage of electric cars, the Lithuanian Parliament seeks to reduce pollution contributing to climate change and take another step towards reaching the goal of green economy.
The incentive is expected to have a positive impact for businesses concerned with their carbon footprint and incentivise businesses to choose electric vehicles.