Vehicles only used as business cars to get colored registration plates

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Photo: Arvo Meeks / Lõuna-Eesti Postimees

Estonian Finance Ministry wants to change as of 2018 the system of taxation of company cars, according to which the taxation of the fringe benefit will depend on the value of the car, while driving logs will partially vanish and cars only being used in entrepreneurship will have to use registration plates of other colors, and these changes will result in 5 million euros less budgetary receipts.

According to the ministry the basis of taxation should be the value of things, but the present system of taxation of company cars does not take that into account. The present law states that entrepreneurs have to pay a fringe benefit tax on cars used both for professional and private use, which depends on the number of kilometers driven or is a fixed sum of 256 euros per month.

The ministry's proposal is to tie the fringe benefit tax with a car's motor power and the price of each kilowatt would be 1.96 euros per month, which means that the tax would be 1.3 euros per kilowatt.

The tax would have to be paid if mixed use is possible, not taking into account whether it is actually being used to make private trips. Therefore no driving log would have to be used for business cars intended for mixed use.

The ministry also proposed using registration plats of a different color to determine which cars are only used in entrepreneurship.

Budgetary receipts are estimated to decline by 5 million euros to 20 million euros if the changes take effect. At the same time, the simplicity and efficient implementation of the new system might result in increased numbers of taxpayers.

The Finance Ministry would like the changes to take effect on Jan. 1, 2018.

Car sellers: Colored plates meant for business cars not suitable for Estonia

In the opinion of the association of Estonian car dealers and service companies AMTEL, the plan of the Ministry of Finance according to which cars only used in entrepreneurship would get registration plates of a different color than those used privately as of 2018 is not suitable for the Estonian society.

The chairman of AMTEL Sulev Narusk told BNS that he thinks the new system would not suit the Estonian society since it means that people would rat out their neighbors to authorities. «Such labeling is not a good idea for our society,» he said.