VAT - Tax Authority’s interpretation of VAT deductibility for Electric and Plug‑In Hybrid Vehicles

In brief

Circular Letter No. 25088, dated 21 November 2025, was published with the Tax Authority’s interpretation regarding the deductibility of VAT on electric and plug-in hybrid vehicles, particularly when those vehicles are used for personal purposes.

In detail

From the Tax Authority’s interpretation, we highlight:

1) Operational Lease (renting)

VAT deduction is only possible when the invoice itemises:

• The component corresponding to the leasing of the vehicle;
• The other services related to its use (maintenance, insurance, assistance, etc.).

If such itemisation is not provided and the consideration is presented as a single lump-sum amount, VAT is not deductible.

2) Private use

If VAT has been deducted and the vehicle is used, even partially, for private purposes, such use is treated as a taxable supply, and VAT is due.

^{© 2025 PwC. This communication is of an informative nature and intended for general purposes only. It does not address any particular person or entity nor does it relate to any specific situation or circumstance. PricewaterhouseCoopers Tax Services TLS, Lda. We will not accept any responsibility arising from reliance on information hereby transmitted, which is not intended to be a substitute for specific professional business advice.}