Taxation of company cars in Estonia

To avoid these taxes and to receive a full VAT return, the company must prove that the car is used 100% for business purposes.

Taxation of company cars applies only for passenger cars.  A passenger car for the purposes of the Value Added Tax Act is an M1 category vehicle, the laden mass of which is not more than 3500 kilograms and which does not have more than 8 seats in addition to the driver’s seat.

If the company would like to buy or cover the cost of using a passenger car, then the company has two tax consequences:

  1. From 01.01.2018 the company must pay 1.3 EUR per kW of taxes per month, as long as the car is in use for private purposes - no car use declarations done.
  2. The Company has a right for only 50% of VAT return.