Buying a Car Through Your Lithuanian Company: Accounting and Tax Treatment

Putting a car invoice in your Lithuanian company's name is easy. Working out its real cost is harder. The purchase raises separate questions about depreciation, corporate income tax, VAT and private use. A business journey does not automatically make every part of the transaction tax deductible.

Can a Lithuanian company buy a car?

Yes. A UAB or MB can buy a car for business activities. Keep the invoice, registration details and evidence of its use. Check the vehicle category and official CO₂ figure before buying: both can affect its tax treatment.

How is the purchase recorded in the accounts?

A car used over several years is normally recorded as a fixed asset, then depreciated over its useful life under the company's accounting policy. The Lithuanian accounting authority's guidance on tangible fixed assets explains this treatment. Accounting depreciation and tax-deductible depreciation need not be the same amount.

How much of the cost is deductible for corporate income tax?

For M1 passenger cars acquired from 1 January 2025, VMI's CO₂-based limits cap the acquisition cost that can be deducted through tax depreciation:

For example, a €40,000 car before VAT emitting 160 g/km has a €25,000 tax-deductible acquisition-cost ceiling. Its full applicable accounting cost remains in the books, but €15,000 of the pre-VAT price cannot enter tax-deductible depreciation. Non-recoverable purchase VAT attributable to the excess is also not deductible for corporate income tax.

Long-term rental can face comparable limits. Cars used exclusively for rental, driving instruction or transport services have exceptions. A deduction reduces taxable profit; it does not reimburse the purchase price.

Can the company recover the purchase VAT?

Usually, a VAT-registered company cannot deduct purchase VAT on an M1 passenger car acquired for its own use. VMI's VAT guidance lists exceptions, including resale, rental and paid passenger transport. The restriction also does not apply to a qualifying M1 electric car costing no more than €50,000 including VAT, when used for VAT-taxable activity. VMI includes battery-electric cars and plug-in hybrids in that category.

The €50,000 figure is a threshold, not a partial VAT allowance for a more expensive car. Voluntary VAT registration does not remove the restriction. VAT on documented business fuel and repairs is assessed separately and may be recoverable even when purchase VAT is blocked.

What happens with running costs and private use?

Keep invoices and records of business use for fuel, servicing, insurance and repairs. VMI treats documented business fuel and operating costs as deductible under the applicable rules. Where an employee's private use is taxed as a benefit in kind, associated costs can also qualify, subject to the acquisition-cost ceiling.

Commuting to a regular workplace is generally private use. Under one common valuation method, the monthly taxable benefit is 0.75% of the car's relevant fair market value if the company pays for private fuel, or 0.70% if it pays for none. On a €30,000 car, that is a benefit value of €225 or €210, not the tax bill. VMI explains the method; our guide to company-car benefits and payroll covers the employment side. Deducted input VAT can create a separate private-use VAT calculation.

Conclusion: calculate the full cost before buying

The price on the invoice is only the starting point. Two cars with the same price can have very different after-tax costs because of their CO₂ emissions, VAT treatment and how they will be used. Decide who may drive the car privately and who pays for fuel before it is handed over, then keep the records that support those decisions.

Before signing, ask your Lithuanian accountant to compare the purchase price, tax-deductible depreciation, recoverable VAT and any taxable personal benefit. That calculation will tell you what the car will actually cost the company and its driver.