The car tax, to enter into force from 2025, will be made up of two parts – an annual tax and a registration fee, both of which are affected by the vehicle's emissions and, in the case of heavier vehicles, weight.

Emissions play a bigger role in the registration fee in an effort to promote more fuel-efficient vehicles. Another component, applicable in the case of private individual owners, is the age of vehicles. This sees the [annual] tax lowered to the base component of €50 for vehicles that are 20 years of age or older.

The tax will be collected by the Tax and Customs Board, which will issue tax notices by February 15. The tax can be paid annually or semi-annually (by June 15 or December 15) or in monthly installments. The registration fee is only due before a vehicle's initial registration in Estonia and will not be charged when an already registered vehicle changes hands.

Exemptions have been kept to a minimum to ensure effective tax collection and will only reach alarm vehicles, vehicles rebuilt to accommodate people with disabilities and vehicles exempt from tax based on international agreements.

"We carefully considered how to compensate people with disabilities for the tax burden growing. The Ministry of Social Affairs and the Estonian Chamber of People with Disabilities have put together necessity-based support measures aimed at improving the mobility of all people with special needs, including those who do not own a vehicle," Minister of Finance Mart Võrklaev said.

The finance minister added that the main aim of the vehicle tax is to rein in motorization, especially in cities, promote sustainable mobility and the adoption of more environmentally friendly vehicles.

"Estonia has the most polluting and oldest fleet in Europe, looking at carbon emissions. While the average age of passenger cars is 12 years in the EU, it's 17 years in Estonia. Looking at registration of new vehicles, the most polluting vehicles in the EU were bought in Estonia in 2022. We also have more vehicles per person than the regional average," Võrklaev pointed out.

"If we want to carry out green and mobility reforms, make our cities more human-centered and our air cleaner, a motor vehicle tax is an important step on that road. Every tax also yields revenue that can be used to fund important initiatives. The state budget is deep in deficit today and every additional euro helps, especially as we need to boost investments, also in roads and public transport," Võrklaev commented.

The government has previously said that it will leave hammering out the final details of the car tax up to the parliament.

The following categories of vehicle will be affected by the tax:

Passenger cars - M1 and M1G
Vans and pickups - N1 and N1G
Motorcycles - L3e, L4e, L5e, L6e and L7e
Off-road vehicles - MS2
Wheel-mounted tractors T1b, T3 and T5

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