Tax board: Tax exemption cuts on company cars not working

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6/10/2015 9:18 AM
Category: Economy

The Tax Board said that last year's initiative to curb VAT returns on business cars purchased for private use has not had the desired effect.

The new law, which came into effect last December, meant businesses buying vehicles subject to VAT will only receive back 50 percent of VAT, not the full 100 percent as before. The change meant non-utility vehicles became 10 percent more expensive for companies.

The changes have netted state coffers around 1.3 million euros more per month, but the forecast was 47 million euros each year, Äripäev reported.

Marek Helm, head of the Tax Board, said that currently two-thirds of all business-owned vehicles are registered as dual-purpose cars, meaning they are also used for private affairs. By law those cars need to have a detailed travel log, which according to Helm takes a lot of time for tax officials to check.

Companies may pay a certain amount of additional tax to avoid the travel log requirement.

He said that rate should be lower, leading to at least the same tax intake, as currently many companies fake travel logs and would be less inclined to do so if the tax rate for using business cars for private purposes was lower.

J.M. Laats

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