Suomeksi

Motoring Taxation

High Taxation of Road Transport and Car Purchasing in Finland

When compared to other countries, Finland has a high level of taxation on road transport and automobile purchases, which slows down the renewal of the country’s motor vehicle population. At the end of 2014, the average age of the passenger cars in use was 11,4 years. The average scrapping age of passenger cars was 20.4 years.

Taxation can be used to support traffic policy objects, such as improving traffic safety and reducing emissions. The introduction of a tax on passenger cars based on carbon dioxide emissions at the beginning of 2008 has turned out to be an effective way of guiding consumers to choose low-emission cars. As a result of the tax reform, the prices of low-emission passenger cars decreased in 2008, and consequently the average CO2 emissions of new passenger cars also decreased to 163.1 g/km, when the corresponding figure for 2007 was 177.4 g/km. In 2014, the average CO2 emissions of new passenger cars were 127,4 g/km. Despite the tax reform, the level of taxation remains high in Finland when compared to other countries.

Road Transport an Important Tax Payer

In addition to VAT, road transport is subject to special taxes. The most significant ones include fuel tax, car tax on the first registration of passenger cars, vans and motorcycles, as well as the annual vehicle tax, which consists of a basic tax component and a tax on motive power charged for diesel vehicles. In addition, fuel tax is subject to VAT. In 2011, the state collected nearly EUR 7 billion in taxes on road transport.

 State tax revenues from road transport

Car Tax

The car tax on the new registration of passenger cars and vans is based on the vehicle’s value and the standard calculation of its CO2 emissions.  Taxable value refers to the vehicle’s general retail value, which is calculated by deducting usual discounts from the retail price specified by the importer. The applied tax rate depends on the vehicle’s CO2 emissions, as specified in tax rate schedule. Under certain conditions, vans are entitled to a reduction in the CO2-based tax rate for gross weight in excess of 2,500 kg.  For passenger cars, the car tax rate has been based on CO2 emissions as of 1 January 2008, and for vans, as of 1 April 2009.

Under the Car Tax Act, car tax is the share of the tax rate in the taxable value of the vehicle, which includes the car tax itself.  In other words, the tax rate defined in the Act is better suited to verifying the amount of car tax already calculated than to actually calculating the car tax. In practice, the basis used for calculating car tax is the price (exclusive of car tax) specified by the importer. In this case, the car tax rate specified in the tax rate schedule has to be adjusted to correspond to the time of calculation.

The new Car Tax Act entered into force on 1 April 2012. The most significant change affected the tax rate schedule. In the new schedule, the minimum tax is 5% and the maximum 50%. The calculation of taxable value did not change. Under the new law, the car tax rate decreased for vehicles with CO2 emissions below 110 g/km and increased for those with CO2 emissions above 110 g/km. The tax rate reductions granted to vans increased by 3%.

As of 1 April 2012, the car tax rate is calculated using the following formula:

t = 52.15 − (51.95 / (1 + e0.015*(c − 152)), where
t = car tax rate 
c = CO2 emissions (g/km) 
e = mathematical constant (2.71828…)

Car tax rates are rounded to the nearest tenth of a percent.

The specified CO2 emission levels correspond directly to the vehicle’s fuel consumption. Consequently, the new car tax favours cars with good fuel economy.

Taxation of Imported Used Automobiles

Imported used automobiles are taxed using the same car tax rate schedule applied to new automobiles. When there is no manufacturer’s data available on the CO2 emissions of an automobile, then the car tax rate is determined based on the vehicle’s gross weight and motive power, in accordance with tax rate schedule. The taxable value of an automobile is its general retail value. There are no importers’ price lists available on used cars that could be used to determine their taxable value. Therefore, the determination of the vehicle’s general retail value is based on market data.

The tax rate is determined based on gross weight also for new vehicles that are not subject to EC type approval and EC regulations on emissions measurement. Such vehicles include, for example, automobiles manufactured in small numbers and individual automobiles manufactured outside of the European Community.

Vehicle Tax

Vehicle tax is a daily tax collected on the traffic use of a motor vehicle. A registered vehicle can be decommissioned from traffic, which ends the collection of vehicle tax during the period of decommissioning. Vehicle tax is usually collected one year in advance with a tax demand note, in which case the tax being demanded includes daily taxes calculated using different tax rate schedules for the period of the recent tax reform. Vehicle tax consists of a basic tax component and a tax on motive power.

Basic Tax Component and Tax on Motive Power – Amendments and Principles

The basic tax component of vehicle tax applicable to passenger cars, vans and recreational vehicles changed as of 1 March 2011, thereafter being based on the vehicle’s CO2 emissions. The tax reform has been visible on tax demand notes as of 1 March 2010, because the tax is collected one year in advance. A decision has been made on a change to the basic tax component as of 1 March 2013. This change has been visible on tax demand notes as of 1 January 2013. The tax on motive power (so-called diesel tax) was reduced for passenger cars as of 1 January 2012. As this tax is also collected in advance, the change has been visible on tax demand notes since the beginning of 2011.

Older vehicles, for which standard CO2 emissions data is not required, are taxed based on their gross weight. The corresponding CO2 emissions based on gross weight can be calculated using the following formula: c = 10*m + 7, where c = CO2 emissions (g/km) and m = each 100 kg or part thereof of the vehicle’s gross weight. In the actual law, the relationship between the tax and gross weight is presented in a table.

 

CO2 emissions data is used to determine the tax as follows:

  • Passenger cars which have been taken into use for the first time on 1 January 2001 or thereafter and have a gross weight of up to 2,500 kg
  • Passenger cars which have been taken into use for the first time on 1 January 2002 or thereafter and have a gross weight of more than 2,500 kg
  • Dual-purpose vehicles which have been taken into use for the first time on 1 January 2006 or thereafter
  • Vans which have been taken into use for the first time on 1 January 2008 or thereafter

Passenger cars, vans and special vehicles, which have been taken into use prior to the dates presented above, as well as vehicles lacking emissions data, are taxed based on their gross weight.

Usually the Vehicle Register does not contain emissions data measured according to the EC type-approval system for recreational vehicles. However, a recreational vehicle can be taxed based on its CO2 emissions provided that the manufacturer has obtained an EC type approval indicating the vehicle’s CO2 emissions. Usually the taxation of recreational vehicles is based on gross weight, because only a small minority of the newest recreational vehicles carry an EC type approval indicating the vehicle’s CO2 emissions.

The tax on motive power is collected on passenger cars, vans and trucks. The tax is based on gross weight and motive power for passenger cars and vans, and on the number of axles and the use for pulling trailers for trucks. The tax on motive power is not collected on petrol-engine passenger cars. The most common motive power of vehicles subject to the tax is diesel fuel. The tax on motive power is lower for electric and hybrid electric as well methane-powered passenger cars and vans. Here, methane refers to natural gas and biogas.

Base vehicle tax rises as of 1 January 2013

A change in the base tax applies to all vehicles subject to the base tax. If the car does not have emission data in the Vehicular and Driver Data Register reported by the manufacturer, the tax is based on the total mass of the vehicle.
Tax for vehicles, whose sole driving power is electricity, is determined according to an emission level of 0 g/km.

Amount of Basic tax based on CO2 -emissions valid from 1st of January 2013
Amount of Basic tax based on the total mass valid from 1st of January 2013

Tax on Motive Power

The amount of the tax on motive power for diesel-powered passenger cars is EUR 0.055 per day for each 100 kg or part thereof of the vehicles's gross weight. For example, for a passenger car with a gross weight of 2,050 kg, this amounts to EUR 421.57 per year (21 starting 100 kilograms x EUR 0.055 x 365 days). For vans, the tax on motive power is EUR 0.09 per day for each 100 kg or part thereof of the vehicle’s gross weight.

For trucks, the tax on motive power is calculated based on gross weight and the number of axles. Also the use of the vehicle to pull a trailer affects the amount of the tax. For trucks, the tax on motive power varies between EUR 0.006–0.022 per day for each 100 kg or fraction thereof of the vehicle’s gross weight. The calculation of the tax on motive power is explained on the website of the Finnish Transport Safety Agency (Trafi).

Levels of tax on driving power from 1 January 2013

In addition to diesel cars, the tax on driving power is levied on other vehicles, whose driving power is not motor petrol.

From 1 January 2013, the tax on driving power on passenger cars will be differentiated more on the basis of driving power.

Motor energy
Cent/day/100 Kg
Diesel
5,5
Electricity
1,5
Electricity and petrol
0,5
Electricity and diesel
4,9
CNG
3,1

With the change, gas-powered vans will be subject to tax on driving power (0.9 cents/day/100 kg).

New tax bases will enter into force with a one year-long transition period. The change will already be visible on tax demand notes in 2012.

Read more about vehicle tax from Trafi's website

Fuel Tax

The energy tax reform introduced at the beginning of 2011 favours fuels that contain biological components. Energy taxation on transport fuels is based on energy content and CO2 emissions. In addition, the tax rate is affected by near emissions, and for light fuel oil, sulphur content.

Fuel tax consists of energy content tax, carbon dioxide tax and a strategic stockpile fee, which is an earmarked tax-like payment made to the National Emergency Supply Fund. Fuels are subject to a value-added tax of 24%, which represents about 19% of the retail price and is paid for the full price of the fuel, including fuel tax.

The fuel tax rate is defined as euro cents per litre or kilogramme, depending on the product. This means that the share of fuel tax in the retail price of fuel varies according to fluctuations in retail prices. For example, if the price of a litre of petrol is EUR 1.65, then the share of taxes is approximately 57 %.

The prices of petrol or diesel fuels currently on sale at petrol stations contain tax in accordance with their content of actual petrol or diesel fuel, and different biological components. Previously taxation applied to products sold directly to customers, but now different fuel components are being taxed differently.

For more information on taxation, visit the following websites:

The Association of Automobile Importers in Finland
The Finnish Central Organization for Motor Trades and Repairs (AKL)
National Board of Customs
The Finnish Transport Safety Agency


print