Riigikogu Passes Vehicle Tax Law
On Wednesday, June 12, 2024, the Riigikogu passed the Motor Vehicle Tax Act, which stipulates that starting from 2025, both an annual motor vehicle tax and a one-time registration fee must be paid. The state expects the new law to increase revenues by 200-230 million euros annually.
Annual Motor Vehicle Tax
Initially, the motor vehicle tax will only be payable on vehicles registered in the traffic register. From January 1, 2027, vehicles temporarily deleted from the traffic register or with suspended registration will also be subject to tax.
According to the law, the motor vehicle tax must be paid by the vehicle owner or, if there is a responsible user, by the responsible user if the vehicle owner is a leasing company, a non-resident individual, or a legal entity not registered in Estonia.
The annual tax for a passenger car (category M1) generally consists of three components: a base part, a CO2 emission part, and a weight part. The base part is 50 euros. The CO2 emission part increases with higher CO2 emissions. The weight part is calculated only if the vehicle's total mass exceeds 2 tons. For fully electric passenger cars, the annual tax consists of a 50-euro base part and a weight part calculated only if the electric car's mass exceeds 2.4 tons.
The annual tax for a van (category N1) consists of a base part and a CO2 emission part. The base part is 50 euros, and the CO2 emission part is higher for vans with higher CO2 emissions. The annual tax for a fully electric van is 30 euros.
In the initial version of the bill, the age of a passenger car only reduced the vehicle tax amount if the responsible user or owner was an individual. However, in the law passed by the Riigikogu, the age component applies to passenger cars owned by both individuals and legal entities. The age component also applies to vans. For example, if a passenger car or van is at least 20 years old, only the annual base tax of 50 euros needs to be paid.
According to the Motor Vehicle Tax Act, annual tax must also be paid for vehicles in categories L, MS2, T1b, T3, and T5. The maximum annual tax for these vehicles is 90 euros.
One-Time Registration Fee
A one-time registration fee must be paid for passenger cars and vans. Initially, this fee was only required when the vehicle was first entered into the traffic register. However, the passed law requires the registration fee to be paid also upon the first change of ownership if the registration fee has not been paid previously. Exceptions include the transfer of ownership at the end of a lease agreement to a person who was listed as the responsible user during the lease or if the vehicle is inherited.
As the registration fee now applies in more situations, the fee rates have been reduced compared to the earlier version. For example, the base registration fee for a passenger car has been reduced from 300 euros to 150 euros, and for vans from 500 euros to 300 euros.
The registration fee for a passenger car consists of a base part, a CO2 component, and a weight part if the car's total mass exceeds 2 tons. The registration fee for a fully electric passenger car consists of a base part of 150 euros and a weight part if the car's total mass exceeds 2.4 tons.
The registration fee for a van consists of a base part of 300 euros and a CO2 emission part. The registration fee for a fully electric van is 200 euros.
Similar to the annual vehicle tax, the registration fee includes an age component, meaning the older the vehicle, the less the fee. This component applies to vehicles owned by both individuals and legal entities.
The law stipulates that registration fee rates will increase in 2028 and 2031.
A new provision in the law allows for the possibility of requesting a refund of the registration fee if the vehicle is deleted from the register to be used outside Estonia. Several conditions must be met for the refund, such as applying within 60 days of deletion from the register, and the refundable amount must be more than 300 euros.
If the president promulgates the Motor Vehicle Tax Act, the vehicle tax and registration fee will be payable starting in 2025.
You can learn more about the vehicle tax law adopted by the Riigikogu here.