Under the draft car tax, the registration fee was only payable on vehicles that were registered in Estonia for the first time. In other words, on those bought here from abroad. The European Commission said this was unfair to all second-hand car dealers operating elsewhere in Europe. That's why the finance ministry made a U-turn on the plan.

"Such a solution might have been more to the liking of our people, but it did not fit the European rules," Finance Minister Mart Võrklaev (Reform) said.

"Registration tax will now be extended to cars in Estonia at the first change of ownership after the car tax comes into force," he explained. He added that a broader tax base will allow registration tax rates to be lowered so that those who cannot immediately afford a new vehicle can buy and sell used vehicles at a reasonable price.

This means that if you sell your car in January of next year, the state will take the registration fee, but if the buyer still doesn't like the car and sells it a few months later, the state will no longer collect the registration fee. "But, at the same time, we will bring these registration fee rates down so that the exchange of cars in Estonia remains reasonably possible," Võrklaev said.

According to the Ministry of Finance, registration fees will be reduced by two to five times compared to the initial draft. The basic registration fee will be €150 instead of €300. At the same time, the registration fee component based on CO₂ emissions will be reduced.

Dealers of cheap cars will be most affected by the change

For example, for a five-year-old Toyota Corolla bought abroad, the registration fee in the original draft would have been €665. The new version would be €260. For a 10-year-old Volkswagen Passat, the registration fee was just over €1,000 in the previous draft; now it would be €330.

The ministry of finance proposes that the registration fee for the most common vehicles up to four years old be €1,100, €850 for five to 10 year olds, €600 for 10 to 14 year olds, €500 for 15 to 19-year-olds, and roughly €400 for even older vehicles.

Most affected by the change will be people who want to buy or sell older cars in poor condition within Estonia. For example, you can find a Volkswagen Golf for €500 on sales portals. The registration fee would be one-third to one-half of the planned price.

Evelin Liivamägi, deputy secretary general at the Ministry of Finance, told Vikerraadio's "Uudis+" program that in general the registration fee should still be less than 10 percent of the price of the car.

"We don't want to become a European wreck either," Liivamägi said, pointing out that a car that can run for a year or two usually costs a few thousand euros. And the registration fee for such a car is usually around 10 percent.

You do not have to pay a registration fee if you scrap your car. "For cars that old, it might make sense to scrap them and buy a greener car," she said.

Registration fees will increase over time

The Ministry of Finance estimates that in about seven years most of the cars in Estonia today will have changed hands at least once. And from then on the car tax would be levied mainly on vehicles imported from abroad. However, the ministry does not believe that state budget revenues will decrease over time.

The minister of finance added that the registration fee will continue to be a lever to encourage people to make greener choices and also to secure budget revenues. To ensure this continues as the living standards rise, registration fees will increase in 2028 and 2031.

Unlike the previous version of the law, if an car is sold outside of Estonia, the registration cost paid earlier will be repaid. Liivamägi said that this is required to ensure that Estonian vehicle dealers compete on an equal basis in the overseas market.

"You will not get back exactly the amount you paid at the time, but the registration fee will be depreciated," Liivamägi said. That is, if you buy a car and pay a registration fee for a two-year old car, then five years later, when you sell it to Latvia, you will get back the fee for a seven-year old car, which is slightly less.

If the car is more than 10 years old, the registration fee paid for it is no longer refundable. "In the case of a ten-year-old vehicle, this fee is a very small part of the market price," Võrklaev said.

This is also an important message for car collectors who collect and display cars as an NGO or business. For vehicles over 20 years old, the annual fee is €50 per year.

"Perhaps no more than €50 per car per year for collectors of old cars," Liivamägi said.

Another important change concerns legal entities. Whereas previously the age multiplier only reduced the annual tax and registration fee for vehicles owned by natural persons, the same rule will apply now to legal entities.

So the age of the vehicle – for both natural and legal persons, and for both passenger cars and vans – reduces the amount of both the registration fee and the vehicle tax.

There is no registration fee if you buy the vehicle from a leasing company and register it in your own name, as the registration fee will be applied at the time of the next sale.

--

Follow ERR News on Facebook and Twitter and never miss an update!