No separate application process for parents' vehicle tax exemption
The government approved a car tax discount for all parents with at least one child under 19. The Tax Board will automatically deduct up to €100 per child.
According to Minister of Finance Jürgen Ligi (Reform), the government wants to provide tax relief to those who directly depend on a car.
The reduction is up to €100 for each child. It applies to parents or individual legal guardians who have valid and unrestricted custody rights.
If a child has multiple parents, each owning a vehicle, the deduction is split between them. The benefit can be used during the entire taxation period but does not carry over to the next one.
There is no need to apply separately for the reduction. The Tax Board will review this year's tax notices, make the necessary recalculations and, if needed, issue refunds to the taxpayer's prepayment account.
As a result, families' motor vehicle tax burden will fall by more than 50 percent on average, with a total reduction of €16 million.
A second change will significantly lower the tax rate for minibuses. Eight- and nine-seater minibuses currently registered in the M category (passenger cars) will instead be taxed under the N category (commercial vehicles). While the M category tax rate consists of three components, the N category has only two: a base rate and a CO₂ emissions component.
The government says the change aims to support large families and people with disabilities, who may have a greater need for minibuses.
The average tax obligation will drop from €183 to €63, saving a total of about €1.7 million.
Administering the exemption to cost €680,000 over two years
Finance Ministry Undersecretary Evelyn Liivamägi told Vikerraadio that the annual car tax was expected to bring in about €100 million, meaning the child-related deduction will reduce projected revenues by nearly one-sixth.
For those who have already paid more than they now owe, the Tax Board will return the difference to their prepayment account, from which it can be withdrawn if needed.
If a family has several children and multiple cars — say, one with an annual tax under €100 and another over €100 — the deduction is divided between the parents. For example, with three children, each parent receives €150 in relief. If one parent's tax bill is only €50, the unused portion is automatically applied to the other parent's vehicle, Liivamägi explained.
In the case of blended families, the discount applies to the car-owning parent raising the child. "The system looks at who has the tax obligation, whether that person has biological children, and also the children for whom they hold custody rights. Those children count toward the exemption," Liivamägi said.
The additional cost of administering the deduction — such as dividing benefits, tracking unused amounts and related tasks — will total about €680,000 over the next two years.
The article was updated to add details from the Ministry of Finance.
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Editor: Barbara Oja, Marcus Turovski
