Estonia, Financial Services, Legislation, Taxation, Transport

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Estonian Riigikogu will discuss car taxation

Juhan Tere, BC, Tallinn, 14.04.2014.Print version
The Government of Estonia approved the amendment drafts on the Income Tax Act and the Value Added Tax (VAT) Act related to car taxation at a cabinet meeting on Thursday, and later sent them to the Riigikogu for discussion, reported BC the press service of the government of Estonia.

According to the amendment to the VAT Act, the deduction of input VAT on a purchased car is allowed to the extent of 50% if the company uses the car for both work and private rides. If the car is only used for work rides and it is proved, then the whole input VAT can be deducted in the future. Exceptions will be applied to passenger cars, which are purchased for resale or rental purposes without using them beforehand and also to taxis and vehicles for driving practice.

 

The draft has taken the proposal of business organizations into account to omit the 2,000 euro limit for the deduction of the input VAT as stated in the previous draft.

 

Most of the EU Member States limit the deduction of input VAT for passenger cars and related expenses up to 100 percent. In addition to Estonia, no restrictions have been not yet imposed by the Czech Republic, Slovakia, Germany, Luxembourg and the Netherlands.

 

The draft to amend the Income Tax Act organizes the rules on tax exemption on the compensation paid to an employee for using his or her private car for performing official duties and increases the duty-free threshold for compensation payable in case of an existing record on the rides.

 

As a result of the discussion between the partners, the compensation meant for the use of a private car for official duties will be increased from the previous 256 euros to 335 euros per month. This can be paid duty-free only on the basis of 0.3 euros/km.

 

According to the amendment, the current amount of 64 euros per month cannot be paid without keeping a record in the future.






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