Almost one-third of luxury cars registered as company vehicles

Supercars on display at the Gran Turismo 2016 event in Tallinn.
Supercars on display at the Gran Turismo 2016 event in Tallinn. Source: Rene Suurkaev / ERR

A third of the Bentleys, Bugattis, Ferraris, Maseratis and Lamborghinis on the Estonian Transport Administration's (Transpordiamet) vehicle register are registered as work vehicles. According to the Estonian Tax and Customs Board (EMTA), this does not necessarily indicate that the cars are used for personal transportation.

According to Transport Administration data, Lamborghinis have the largest proportion of registered work vehicles and Maseratis have the lowest proportion of registered work vehicles.

At the end of June, 580 luxury cars from the five manufacturers had been registered, with 174, or 30 percent, being used for business.

As of the end of June, there were 113 registered Lamborghinis, of which 46, or 40.7 percent, are designated as work cars.

There were 188 Bentleys on the register, of which 63, or 33.5 percent, are business cars.

There were a total of 124 Ferraris on the register, and 34, or 27.4 percent, are in business use.

And there were 155 registered Maseratis, of which 31, or 20 percent, are used for business.

There were no Bugattis on the Estonian car register at that time.

If vehicles with suspended registrations are also included, the number of vehicles of each of these luxury car brands on the register would be about a tenth higher.

According to the Transport Administration, 288 passenger cars with engines exceeding 400 kilowatts were registered for the first time in 2021, of which 140 were brand-new. Last year, 405 vehicles with the same power were registered, 204 of which were new, whereas in the first half of this year, 215 vehicles with the same power were registered, 128 of which were new.

Tax Administration: Expensive cars can be also used for business purposes

Madis Laas, the EMTA head tax auditor, said that the brand of the car acquired does not imply that the vehicle would not be used exclusively for business  transport.

"Companies in the car rental industry are an example. Such companies are in the business of renting cars, especially expensive ones, and there is usually no risk of vehicles used on behalf of the company being used for personal purposes. In other words, the purchase and registering of expensive cars as for business purposes is not necessarily done for tax evasion, but for commercial reasons," Laas said.

"Because no law specifies how expensive a vehicle a company can buy for its business," Laas continued, "the EMTA does not have a special focus on companies that have purchased expensive vehicles based solely on the brand of the car."

However, the use of any corporate car for private journeys is also subject to personal income tax, and the deduction of VAT paid on the purchase of the vehicle and goods and services is only partially permitted, the EMTA spokesperson went on to say.

"The EMTA will certainly pay attention to these circumstances during tax inspections, and if the use of a car registered for 100 percent business transportation is also found to be used for private purposes, it is normal for additional tax liabilities to be imposed during the inspection," the agency's chief tax auditor explained.

The rate of tax on a car used for private travel is determined by its capacity

According to information published on the tax board's website, the private use of an employer's vehicle constitutes a fringe benefit. This implies that it is not the use of the employer's car for private purposes that is significant, but rather the use of the car for work. Reimbursement for private use of the employer's car is also irrelevant, as it does not affect the taxation of a fringe benefit.

A fringe benefit is inherently the recipient's income, i.e., the employee, but the employer is responsible for paying income and social taxes on fringe benefits.

Gratuities, i.e., employer-provided benefits, are taxed at a rate of 20 out of 80 with income tax and 33 percent with social tax.

The tax liability for the special bonus is based on the vehicle's capacity and is €1.96 per kilowatt for new cars and €1.47 per kilowatt for cars older than five years.

For instance, the price of the special incentive for a new car with a 400-kilowatt capacity is €1.96 times 400, which equals €784, on which the income tax is calculated as €784, 20 percent of 80, or €196; the social tax is calculated as €784 plus €196 times 33 percent, or €326.67; a total monthly tax liability of €196 plus €326.67, equals €522.67.


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Editor: Mait Ots, Kristina Kersa

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