Image: Midjourney AI
From January 1, 2025, a new one will apply in Estonia automaks, which will lead to significant changes for both companies and individuals. The purpose of the new tax is to reduce the environmental impact of cars, motivate people and companies to choose less polluting vehicles and fill the state budget. In this article, we provide an overview of the main aspects of the car tax and what to keep in mind when introducing it.
Nature and structure of car tax
Car tax consists of two main parts: a one-time registration fee and an annual annual tax. It will apply to all vehicles registered in Estonia, with some exceptions, such as emergency vehicles. The amount of the tax depends on a number of factors, including the age of the vehicle, CO2 emissions (or in some cases engine power) and gross weight.
The tax is charged to the name of the owner or responsible user in the register as of January 1 of each year. Payment must be made twice a year: by June 15 and December 15. The Tax and Customs Board sends tax notices for the current year no later than February 15, which gives owners enough time to plan and pay the tax.
Registration fee as part of car tax
The registration fee is a one-time tax that must be paid for the first registration of a new or used vehicle in Estonia and also for the first change of ownership after the entry into force of the car tax in January 2025. It is important to note that if the vehicle is bought out from the leasing company or received as an inheritance, the registration fee does not have to be paid - the fee has to be paid only in the case of the next sale transaction.
For passenger cars, the registration fee consists of a base component, a CO2 component and a gross weight component. There is no CO2 component for all-electric vehicles. The van registration fee only includes the base part and the CO2 component. If there is no CO2 data in the vehicle register, the reference value of the WLTP method is used for calculation.
The motor vehicle tax rate is multiplied by a multiplier depending on the age of the motor vehicle, which decreases depending on the age and reaches zero in the case of a 20-year-old vehicle.
Annual tax and its calculation
When calculating the annual tax, CO2 emissions, engine power, gross vehicle weight and age factor are taken into account.
Also, in the case of annual tax, the age multiplier is an important element, which reduces the car tax of all vehicles based on engine power and gross weight. For cars over 20 years old, it reaches 0 euros, which means that in the future only the base fee has to be paid.
Looking to the future, the Ministry of Finance has announced planned price increases in 2028 and 2031. These increases concern both passenger car and van registration fees. In addition, the share of CO2 emissions in the registration fee will increase, and the base and mass fraction rates will also increase.
What do companies and individuals need to consider?
The introduction of a new car tax requires thorough financial planning from both companies and individuals. Companies that use a large fleet of vehicles in their operations must assess the impact of the car tax on their cost structure. Individuals should consider how the new tax will affect their monthly expenses when planning a vehicle purchase.
When choosing a vehicle, it is worth considering investments in electric or hybrid vehicles, as the new tax system favors more environmentally friendly options. Before making a purchase decision, it is wise to analyze the tax rates of different vehicles in order to find the most suitable and cost-effective solution for you.
Accounting and tax advice become especially important in the context of car tax. Businesses should ensure that their accountants are aware of the new car tax law and are prepared to implement the relevant changes. Individuals may benefit from consulting a tax advisor to find the optimal solution for their situation.
Kokkuvõte
Starting in 2025, the car tax will bring significant changes to Estonian car owners. Both companies and individuals must factor the new tax into their financial and vehicle plans. Timely preparation and thorough analysis help to avoid unexpected costs and make the best choices in the new tax environment.
It is important to remember that the exact car tax rates are set by law and special calculators have been created to calculate them. We recommend using official sources to calculate the exact tax amount to avoid unpleasant surprises.
Exact car tax rates are stipulated by law. Use it calculator to calculate the exact tax amount.
Reference to the Motor Vehicle Tax Act.
Transport Authority vehicle data request.
Want to know more about the impact of car tax on your business or personal finances? Contact Grow Finance experts for a personal consultation!
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