Latvia increases representative car value threshold to promote electric cars and sustainable development

The Saeima has adopted the long-awaited and logical decision in the industry to increase the value threshold of a representative car from 50,000 to 75,000 euros. This could also be one of the incentives for the increase in sales of electric cars and, therefore, the possibility for Latvia to more successfully approach the set sustainable development goals of the European Union.

However, an important and valuable step would be to set the period of application of the representative car tax up to five years, thus creating a proportionate tax policy and not having to pay an increased rate even after 10 years for a once exclusive car.

Additional burden on businesses is removed

Over the years, the prices of new cars have increased significantly due to inflation and rising costs of raw materials. As a result, standard-class cars and everyday electric cars are now treated like luxury vehicles, subject to the representative car tax. This creates a burden for any company that wants to buy such a car, because in reality one is not buying a luxury vehicle. This has a particular impact on companies that buy cars in bulk. Until now, it has been observed that other ways to register or buy cars are being sought, often bypassing the legislative norms.

Although the road to change was relatively long, the Saeima has finally adopted amendments to the Corporate Income Tax Law, increasing the value threshold of a representative car from 50,000 to 75,000 euros. Thus, companies will be able to buy cars from a wider range of offers, they will not need to look for other ways to register them, and the “green” policy will be promoted, as there will be more options in the range of electric cars at higher prices. As a result, the country’s economy and environment will be positively affected.

Companies have more opportunities to buy an electric car and evaluate their employees

Thanks to the changes made, the door is “opened” for companies to buy electric cars with a stronger battery, which ensures greater mileage, thus promoting the sustainability of companies. By using electric cars, the costs associated with the operation of internal combustion engine cars will be saved.

As a result of the changes, companies are given more opportunities to appreciate their employees and their contribution to the workplace by providing better class cars or their equipment. Also, employers will be able to support employees with large families, for whom the prices of suitable vehicles are often higher than standard cars with five seats.

Positive impact on the economy and the environment

Companies will no longer need to register cars in other countries where such a tax is not applied. Thus, the number of registered cars in Latvia will increase, as well as a greater interest in buying new vehicles is expected. The vehicle operating tax will be collected for the actual number of cars moving in our country, and in general, a positive impact on the Latvian economy will be promoted.

On the other hand, with the increase in the sale of electric cars, Latvia could successfully approach the guidelines set by the European Union regarding the impact of vehicles on the environment. CO₂ the amount of emissions will decrease, thus reducing the amount of greenhouse gas emissions.

It is necessary to limit the period of tax application

The next important step is to review the regulation on the period of application of the representative car maintenance tax. The value of the vehicle decreases every year, so it would only be logical to apply the tax for a certain, limited period. The Auto Association also draws attention to the need to revise this regulation. The current regulations provide a perpetual representative status for these cars, thus creating a disproportionate tax policy for vehicle owners. The changes would create an appropriate car value, resulting in a more successful system as a whole.

Author of the article: Daina Kantāne, head of the AVIS full-service leasing department