Changes on usage of special benefits for vehicles in Estonia
From 1 August 2017, the Act amending the Income Tax Act and other related Acts entered into force, which amended the provisions relating to special benefits for company vehicles, reimbursement of parking fees and transport of employees. Changes affect mainly the taxation of usage of the company vehicles in Estonia. Previously, a maximum price of 256 euro was applicable to usage of a car for the non-business related activities, free of charge or at a discounted price. The threshold was applied in the absence of record-keeping and the maximum tax liability regardless of the actual market value of the benefit was 169.6 euros (income tax 64 euros, social tax 105.6 euros). The employee was also able to keep a logbook for the purpose of a lower special benefits tax to be applicable.
From 1 January 2018, the possibility to declare a special benefit on a kilometre basis will be abolished (i.e. the need to keep a log-book), as well as the maximum special benefits bonus provided for the use of vehicles disappears. The amended special benefits tax regulation shall take into account the capacity of the vehicles engine and age of vehicles, owned by the companies. According to the new law, the price of the special benefits tax is 1.96 euros per car engine power kilowatts, and without the upper limit. This means that for a 130-kilovated-engined vehicle, the special benefits price rate is the same as was the previous upper limit. Generally speaking the price of special benefits for less powerful cars will decrease and the special benefit of the cars with higher-power engines will increase. The tax deduction for the special benefits price will be EUR 1.3 per kilo. As the price of cars is decreasing in time, therefore, the price of the special benefits of the vehicles in the age of five years is 25% lower, which means that the price of the special benefit per kilowatt is EUR 1.47. The employer is also subject to an additional obligation to notify the Road Administration if the car belonging to a company is only used for a work, official or service tasks. According to the employer's application, the Estonian Road Administration submits the relevant information in to the traffic information register. State fee will not apply for the application. In the absence of a registration, it is assumed that the car will also be used for private purposes, and usage of the vehicle will entail an obligation to pay a kilowatt-fee.
Additionally, a retroactive effect from July 1, 2017 will apply to the amendment of the parking reimbursement rules. According to the new amendments, an employer may, on the grounds of the cost document, compensate the employee for a parking fee irrespective of the payment of compensation for work duties or the kilometres of his own car. The law also applies retroactive effect from 1 July 2017 on the new special benefit rules for employees transport. Under the new procedure, an employer may arrange the transport of staff to be carried out on a bus ordered by him without being considered as a special benefit. Transportation of the employees is not considered as a special benefit if the employee lives at least 50 km away for the workplace.
Should you have any questions about special benefits fore vehicles in Estonia, Latvia or Lithuania, please do not hesitate to contact our English speaking lawyers at info@gencs.eu.
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