Comprehensive Overview of the New Motor Vehicle Tax Coming into Effect on January 1
Starting January 1, 2025, a new motor vehicle tax will be introduced, consisting of two parts: an annual motor vehicle tax and a one-time registration fee. Here's a detailed overview of the new tax.
Which Vehicles Are Subject to the Annual Motor Vehicle Tax?
The annual motor vehicle tax will apply to more than just passenger cars (category M1) and vans (category N1). It will also apply to motorcycles and mopeds (categories L3e, L4e, L5e, L6e, and L7e), off-road vehicles (category MS2), and wheeled tractors (categories T1b, T3, and T5).
Initially, the tax will be required only if the mentioned vehicles are registered in the traffic register. Starting January 1, 2027, the tax will also apply to vehicles temporarily removed from the register or those with suspended registration.
If the proposed amendments to the Waste Act, Traffic Act, and State Fees Act are adopted, vehicle owners will have the option to delete the registration of a lost or illegally dismantled vehicle free of charge until the end of 2025. In 2026, the fee will be 15 euros, and from 2027 onwards, it will increase to 800 euros.
Who Is Responsible for Paying the Annual Tax?
Generally, the vehicle owner is responsible for paying the annual tax. If the vehicle owner is a leasing company, a non-resident individual, or a foreign legal entity, and the vehicle has a responsible user listed, the responsible user must pay the tax.
The list of taxpayers is finalized every year based on the traffic register as of January 1. At that time, the register data will determine who the vehicle owner or responsible user is and, therefore, who needs to pay the tax for that year. If a vehicle is registered for the first time in the Estonian traffic register during the year, the person listed as the owner or responsible user at that moment will be obligated to pay the tax.
How Much Is the Annual Tax?
The tax rate for passenger cars will consist of three components: a base fee (50 euros), a weight-based component, and a CO2 emissions component. For electric cars, the annual tax will include only the base fee (50 euros) and the weight-based component.
For vans, the tax will include a base fee (50 euros) and a CO2 emissions component. The annual tax for fully electric vans will be 30 euros.
If the traffic register does not have data on the CO2 emissions of a car or van, a formula specified by law will be used, taking into account the vehicle's power, empty weight, age, and, if necessary, fuel type.
The age of the vehicle will also influence the annual tax rate. An age multiplier will reduce the tax amount, excluding the base fee, for vehicles that are at least five years old. For instance, if a vehicle is 20 years old, the annual tax will only be the base fee of 50 euros.
The initial draft of the law stated that the age-based reduction would apply only to cars owned by private individuals. However, the Chamber pointed out that this approach was inconsistent with the principles of equal treatment and the “polluter pays” principle. As a result, the law was amended to allow the age-based reduction to also apply to vehicles owned by legal entities, including vans.
The annual tax for motorcycles, mopeds, off-road vehicles, and wheeled tractors will range from 30 to 90 euros, depending on the vehicle’s age and engine displacement.
The Transport Administration has created a motor vehicle tax calculator that will show the amount of tax due based on the vehicle's license plate. The calculator is available here Transpordiameti e-teenindus
How Is the Annual Tax Paid?
The Tax and Customs Board will issue a tax notice to the taxpayer, based on data from the traffic register, detailing the annual tax amount by February 15. For vehicles registered for the first time during the year, a tax notice will be issued within 15 working days after the registration.
The annual tax must be paid in two installments: half by June 15 and the other half by December 15. If a vehicle is registered for the first time before the end of September, the tax must be paid by December 15. If the first registration occurs later, the tax must be paid by June 15 of the following year. If a vehicle is registered mid-year, the tax will be calculated proportionally based on the number of days remaining in the year.
If a vehicle is registered temporarily, the tax will only need to be paid for the period of registration.
Can the Annual Tax Be Refunded or Reduced?
If a vehicle is sold or its right of use is transferred during the year, the paid motor vehicle tax will not be refunded, nor will the tax amount be reduced. For example, if a person sells a vehicle to another country on June 30 and the vehicle is deleted from the Estonian traffic register, the seller must pay the tax for the entire year.
The Chamber proposed during the drafting process that the law should include a provision allowing a reduction or refund of the annual tax if the vehicle is not registered in the Estonian traffic register for the entire year. However, this suggestion was not accepted.
When Must the One-Time Registration Fee Be Paid?
The registration fee must be paid before a passenger car or van is registered for the first time in the Estonian traffic register. Paying the registration fee is a prerequisite for making the registration entry.
Additionally, the registration fee must be paid before the first change of ownership of an already registered car or van if the registration fee has not been paid previously.
A change of ownership for a vehicle registered in Estonia is not considered the first registration if the vehicle’s owner changes from a leasing company to the responsible user listed in the register upon the expiration of a lease agreement or if the vehicle is inherited. However, if such a vehicle is later sold, the change of ownership will be considered the first, and the registration fee will have to be paid.
How Much Is the Registration Fee?
The registration fee for cars is based on three components: a base fee (150 euros), a CO2 emissions component, and a weight-based component. The CO2 emissions component will carry more weight in the calculation formula than for the annual tax to encourage the purchase of low-emission vehicles. The registration fee for a fully electric car is determined by the base fee (150 euros) and the weight-based component.
For vans, the registration fee consists of a base fee (300 euros) and a CO2 emissions component. The registration fee for a fully electric van is 200 euros.
The age of the vehicle will also affect the registration fee. Older vehicles will have a lower registration fee, excluding the base fee.
The registration fee rates will increase in 2028 and 2031.
Can the Registration Fee Be Refunded?
A person may request a refund of the registration fee within 60 days of deleting the vehicle from the traffic register if the vehicle is sold abroad. However, there are restrictions. For example, registration fees less than 300 euros will not be refunded. Additionally, the vehicle must not have been registered for more than ten years. If the vehicle has been registered in Estonia for less than a year, the base fee will not be refunded.
If a vehicle is sold within Estonia and remains in the register, the registration fee cannot be refunded.
How Is the Registration Fee Paid?
The Transport Administration will determine the registration fee amount after conducting a pre-registration technical compliance check and before the ownership transfer entry.
When the vehicle ownership changes, the registration fee can be paid through the Transport Administration's e-service, similar to how state fees are paid. The seller and buyer must agree on who will pay the fee and follow the instructions provided in the e-service.
If you have any questions about the motor vehicle tax or the one-time registration fee that will take effect next year, please contact the Chamber’s lawyers at juristid@koda.ee.