Taxation of company cars in Estonia

To avoid these taxes and to get full VAT return 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 passenger car, then company has two tax consequences:

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