- VAT paid on the purchase or import of a passenger car is not deductible, pursuant to Article 54 of Law No. 92/2014 “On Value Added Tax.”.
- The exception to this restriction applies only when the purpose of the economic activity itself is resale, rental, taxi services, ambulance services, or similar activities.
- Subsequent supplies of goods for which VAT was not deductible on purchase are treated as VAT-exempt supplies.
- The rule applies equally to cars purchased for the administrator, staff, or other company needs, not just to those for personal use.
- Law No. 92/2014 has been amended several times since its adoption, so borderline cases should be specifically verified before relying on them.
Law No. Law No. 92, dated July 24, 2014, “On Value Added Tax in the Republic of Albania,” as amended, clearly provides that expenses for the purchase or import of passenger cars, as well as related services, are excluded from the right to deduct VAT. This means that a company that purchases a car for its own needs cannot deduct the VAT on the payment, even if the car is used exclusively for business purposes.
In our daily work, we often see businesses expecting to deduct the VAT on an office car like any other good used in their economic activity, and they're surprised to discover that the law treats this case differently, with a specific exception.
Read also: Our guide to VAT: when and how it applies.
The no-speech rule, according to Article 54
What does the law exclude?
According to Article 54 of Law No. 92/2014, expenses for the purchase or import of passenger cars, and services related to them, are excluded from the right to deduct VAT, regardless of whether these cars are used for the company's, the administrator's, or the staff's needs.
Exceptions to the limitation
The restriction does not apply when the very purpose of the company's economic activity is the purchase of motor vehicles for subsequent sale, their leasing, taxi services, ambulance services, or other activities of a similar nature. In these cases, the VAT on the purchase is deductible just like any other goods intended for the business.
Every time there is a tax or financial change that affects your business, we notify you directly by email with a practical explanation.
Send me free notificationsCalculated example
Purchasing an office vehicle
Company X buys a car for office use, valued at 2,000,000 lek plus 400,000 lek VAT, for a total of 2,400,000 lek. Since the company's purpose is not resale, leasing, or taxi services, the 400,000 lek VAT is not deductible. The entire amount paid, 2,400,000 lek, is recorded as the asset's cost.
The resale of such a car
If Company X later sells this car, the sale is treated as a supply exempt from VAT, because the VAT was not deductible at the time of purchase. Therefore, neither the purchase nor the subsequent sale generates VAT to be paid or deducted, in accordance with Article 54 of Law No. 92/2014.
Why it Matters
The most common mistake in practice
The typical mistake is deducting VAT on an office vehicle by treating it like any other good, then having to make a mandatory correction during an audit, with additional late‐payment interest. Another common mistake is failing to consider the opposite case, when the business is engaged in reselling or leasing vehicles and forgets to deduct the VAT to which it is legally entitled.
How we handle this with our clients
Before registering the purchase of a vehicle for a client, we first verify the purpose of their activity to determine whether VAT is deductible or not, and we record it accurately from the outset to avoid any subsequent corrections.
Frequently asked questions
Does the restriction also apply to rental cars?
The limitation in Article 54 specifically refers to the purchase and import of passenger vehicles, as well as related services. Vehicle leasing may have additional specifics, so we recommend verifying the specific case with a specialist.
What happens if I sell the car I bought without VAT deduction?
The sale is treated as a supply exempt from VAT, precisely because the VAT was not deductible on purchase. No VAT is charged on the subsequent sale price.
Which businesses benefit from the exemption?
Businesses whose primary economic activity is the resale of vehicles, vehicle rental, taxi services, ambulance services, or similar activities by nature. For these, the VAT on purchases is normally deductible.
Law No. 92/2014 remains the primary act governing VAT in Albania, amended several times since its adoption in 2014. Since the VAT thresholds and rates change from time to time, please refer to our updated guide for any further details. Our guide to VAT.
