Pending tax exemption cuts behind 20% rise in car sales

(Postimees/Scanpix)
11/12/2014 12:20 PM
Category: Economy

The number of new cars sold in Estonia jumped by 20 percent in October, passing the 2,000-mark for the first time since 2008.

The main reason is a new change in the tax system, whereby cars owned by companies will no longer by subject to a full VAT refund. Businesses buying a new car, or a used car subject to VAT, will now only get back 50 percent of tax from December 1.

The Ministry of Economic Affairs hopes to net close to 50 million euros from the change next year, although car sellers are less optimistic, saying there are still loopholes.

Car sales numbers began increasing in comparison to 2013 sales in June, when 200 more new vehicles were sold than during the same month a year ago.

New car sales are expected to come crashing down in December, when the new regulations hit. December is also traditionally one of the slowest months for car sales.

The change in law was a part of former Finance Minister Jürgen Ligi's campaign against tax exceptions. He said that many businesses are set up just to buy a vehicle VAT-free, meaning a 20 percent discount.


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