Car leasing for a company: news in 2026
- Kristaps Spruntulis
- 3 days ago
- 3 min read
Leasing a car to your company is a common practice, but it requires careful preparation and accurate documentation. In the spring of 2026, a court case took place in Latvia, which reminded us how careful we should be when dealing with such transactions. The State Revenue Service (SRS) pays special attention to car leasing between related parties, and mistakes can be costly. In this article, we will look at how to legally lease your car to a company, avoiding the most common mistakes.
What happened in the legal proceedings and what mistakes were made?
The proceedings revealed several significant shortcomings in the specific case:
Some of the cars did not even belong to the lessor, which cast doubt on the authenticity of the transaction.
The contracts had expired or were incomplete, and there was a lack of clarity about the terms and conditions of the lease.
The invoices lacked essential information, such as the contract number, rental period, or mileage data.
There was no evidence that the cars were used exclusively for company purposes, but VAT was deducted at 100%.
The court concluded that the transactions were formal, not real, and the SRS's claims were found to be justified. This case clearly shows that leasing a car for your company is possible, but only with strict procedures and documentation.
Is renting a car for your business legal?
Yes, leasing a car for your business is a legal and widely used practice. However, it only works if the following conditions are met:
The transaction is economically justified and meets the company's needs.
The rental price corresponds to the market price for similar car rentals.
All documents are properly prepared and complete.
If any of these conditions are not met, the SRS may consider the transaction to be formal and refuse tax deduction or impose penalties.
4 key principles to avoid mistakes
1. Economic logic
The car must be truly necessary for the business's operations. For example, if the business is engaged in the delivery of goods or customer service, the use of the car is justified. However, if a luxury car is leased without a clear business function, the SRS may consider it private use and refuse to recognize it as a business expense.
2. Market price
The rental price should not be artificially high or suspiciously low. For example, if a similar car rental on the market costs 300 euros per month, then the rental agreement should indicate a similar amount. To prove the adequacy of the prices, it is recommended to keep advertisements or copies of other market offers.
3. Documentation
This is where mistakes are most often made. You need at least:
A written lease agreement with clear terms.
Acceptance and handover certificate indicating the date, time and odometer reading.
If the lessor is a legal entity or a self-employed, invoices must also indicate at least the car's license plate number and the rental period.
If the documents are formal or incomplete, the SRS may ignore them.
4. Taxes and evidence
Company light vehicle tax (UVTN) must be paid if the car is used for more than 15 days per month.
VAT can usually only be deducted at 50%.
100% VAT deduction is only possible if a GPS is installed, which confirms that the car is used only for company purposes.
Practical tips for renting a car for your company
Assess the need . Before signing a lease agreement, make sure that the car is really necessary for the company's operations.
Compare market prices . Research similar car rental offers and keep them as proof.
Prepare accurate documents . The contract, acceptance and handover certificate, and invoices must be complete and correctly filled out.
Control the use of the car . The ownership must be registered with the CSDD and, if UVTN is paid, fuel write-off acts must be drawn up, or a GPS must be installed if the vehicle is used 100% for business activities.
Consult an accountant or lawyer . Tax laws and requirements can change, so professional help will help you avoid mistakes.
