Corporate Income Tax In 2025: Purchasing Or Renting Less Environmentally Friendly Cars Will Cost More

• Published date: 22 January 2025
• Subject Matter: Tax, Income Tax, Corporate Tax, Sales Taxes: VAT, GST
• Law Firm: Ellex
• Author: Ms Laura Navicke and Rūta 'vedarauskien&#279

Sustainability and Taxes'two words that can send shivers down the spine of some business leaders. However, in a move to encourage companies to adopt more sustainable practices, new amendments to the Law on Corporate Income Tax took an effect on January 1, 2025. These changes increased corporate income tax rate from 15%to 16% and altered the rules for attributing costs related to the purchase and rental of passenger cars to allowable deductions.

According to expert Rūta'Svedarauskienė and senior associate Laura Navickė from the law firm Ellex Valiunas, the upcoming changes will widen the gap between financial and tax accounting, increasing the workload for accounting professionals and raising the tax burden for companies that purchase or rent less environmentally friendly cars starting from 2025.

Allowable Deductions for the Purchased Car Will Depend on CO2 Emissions

Until the end of 2024, businesses were able to deduct the full cost of purchasing or renting passenger vehicles. However, as of 1 January 2025, only a portion of the purchase price of a newly purchased car will be eligible for the deduction, depending on its carbon dioxide (CO2) emissions. The lower the emissions, the larger the deductible portion of the cost (or the entire cost, if it does not exceed a specified limit):

• If CO2...