The incentives and legislations section is undergoing a comprehensive annual update for 2025, due to be published by 18th April 2025.

The last annual update was to represent situation as of 2024, publihsed on 23rd April 2024.

Incentives and legislation that aim to increase uptake of alternative fuels vehicles and infrastructure.

If you know of other national or local incentives that should be included in this section, please send us an email, or use the button on the right, and let us know. We review the proposed changes and implement the updates on a short notice. 

Purchase Subsidies

Since December 2023, Estonia no longer offers direct purchase subsidies for electric vehicles. This program was terminated for private individuals at the end of 2023 and for business customers in September 2023.There are no announced plans to reinstate direct purchase subsidies for BEVs in 2025 or beyond

Registration Tax Benefits

Starting January 1, 2025, Estonia will implement a new motor vehicle tax system. This system includes a registration fee and an annual tax.

Fully electric vehicles (BEVs) are exempt from the CO2 component of the registration fee, making them more financially attractive compared to internal combustion engine (ICE) vehicles.

The registration fee for BEVs will only include the base rate and the gross weight component, which is significantly lower than the fees for ICE vehicles.

The specific rates can be found on the Estonian Tax and Customs Board website: https://www.emta.ee/en/private-client/foreigner-non-resident/non-residents/use-e-services.

Ownership / circulation Tax Benefits

BEVs remain exempt from road tax in Estonia.The new motor vehicle tax system, effective January 2025, will apply an annual tax to all registered vehicles. However, BEVs will only be subject to the base rate and gross weight component, further incentivizing their ownership.

Company Tax Benefits

Businesses purchasing electric vehicles may continue to benefit from reduced company car tax rates. This policy remains in place as of 2025.

In Estonia, fringe benefits provided by employers, such as company cars, are generally subject to income tax. However, BEVs used as company cars may qualify for reduced fringe benefits tax, as the government aims to incentivize businesses to adopt electric vehicles.

Companies purchasing BEVs for business purposes may be entitled to tax deductions. This includes deductions for expenses related to the acquisition and operation of BEVs, which can reduce the overall tax liability for businesses.

Estonia's corporate tax system allows companies to reinvest profits tax-free. This can indirectly benefit companies investing in BEVs, as they can allocate more resources toward sustainable initiatives without immediate tax liabilities.

VAT Benefits

As of 2025, there are no specific VAT reductions or exemptions for the purchase of BEVs in Estonia. The standard VAT rate is 22% until June 30, 2025, after which it will increase to 24%.
VAT registration is required for businesses involved in the sale or purchase of goods and services, including BEVs, if their turnover exceeds €40,000. However, there are no special VAT schemes or reduced rates specifically for BEVs.
Businesses purchasing BEVs can deduct input VAT on the acquisition of vehicles used for business purposes. This is a standard provision under Estonian VAT law and applies to all eligible business expenses.

Other Financial Benefits

Under the 'Lemmik' program, Eesti Energia, a major energy provider in Estonia, offers discounts on electricity prices for electric car users. This program helps reduce the operational costs of BEVs.
Some local authorities in Estonia provide subsidies for the purchase of electric vehicles. For instance, Tallinn offers a subsidy of up to €5,000 for the purchase of an electric car, while Tartu provides a subsidy of up to €3,000.
Grants are available for the installation of home and workplace charging stations. For example, the Green Investment Grant program provides up to 50% of the installation costs, capped at €5,000. This initiative encourages private individuals and businesses to invest in charging infrastructure.

Local incentives

Several municipalities in Estonia continue to offer free parking for electric vehicles in designated parking zones. This incentive is particularly beneficial for urban EV owners who frequently park in city centers. For example, Tallinn, the capital city, provides free parking permits for electric vehicles.
In some areas, electric vehicles are allowed to use bus lanes, which can significantly reduce travel time during peak hours.
The availability and extent of local incentives may vary between municipalities. It is recommended to check with specific local authorities for the most up-to-date information on available incentives.

AF Infrastructure Incentives

The Estonian government is actively investing in expanding the country's public charging infrastructure.

Announced policy changes (effective later in 2025 and after)

Motor Vehicle Tax Implementation: From January 1, 2025, a new motor vehicle tax will be introduced. This tax includes a registration fee and an annual tax. BEVs are favored under this system due to their exemption from the CO2 component and reduced overall tax burden.
Infrastructure Mandates: As of 2025, all new public parking lots must include charging infrastructure for electric vehicles.
Future Tax Adjustments: The registration fees for vehicles, including BEVs, are planned to increase in 2028 and 2031. However, BEVs will continue to benefit from exemptions on CO2-related components.
Estonia aims to have 1 million green vehicles on the road by 2030. The government plans to review its EV policies in 2025 to ensure progress toward this goal.
Estonia has proposed a ban on the sale of new petrol and diesel cars by 2030 and hybrid vehicles by 2035. This policy aligns with the country's goal of reducing greenhouse gas emissions by 70% by 2030.
The government is considering maintaining favorable tax regimes to sustain BEV adoption rates.
There are expectations that rules regarding municipal co-financing of publicly available charging infrastructure may change in the future.

Institutions involved in Incentives

Ministry of Economic Affairs and Communications (Majandus- ja Kommunikatsiooniministeerium)
Environmental Investment Centre (Keskkonnainvesteeringute Keskus, KIK)
Estonian Tax and Customs Board