The taxable value of the benefit depends on the purchase price of the car or, in case of cars registered before 1992, the taxable value is based on the technical details of the car.

The value depends also on the system the employee chooses. The taxable value can be a fixed monthly sum or the benefit can be based on the amount of private mileage. If an employee chooses a fixed free car benefit and drives a new Volvo V70 (purchase price 242,000) he will be taxed on a benefit of 2800 every month.

This amount will be added to his salary.

The Finnish income taxation is progressive and, for example, a director whose withholding tax rate is 45%, pays tax on the car benefit of 2360 a month.

The tax table on car benefits is based on an estimate that the employee drives the car for approximately 18,000km for his private use in a year. If the private use is less than 18,000km the employee may require that the car benefit is lowered and instead calculated on the basis of his recorded private mileage.

His logbook has to include detailed information on the use of the car and it is attached to the employee's tax return.

On the other hand, if the tax authorities can prove that the employee drives more than 18,000 private kilometres per year they can add tax to cover the extra private mileage above 18,000km.

The Finnish National Board of taxes once a year announces the maximum amount of tax-free reimbursement for an employee who uses his own car for business purposes.

Where an employer also provides a garage near or attached to the employee's house, the employee also has to pay taxes on a garage benefit.

Taxation of passenger cars

The taxable value shall include all direct and indirect costs caused to the taxable person before taxation when the cars are delivered to Finland. Consequently, for example, freight costs are included in the taxable value. In case of cars imported to Finland as intra-Community goods, the taxable value of the cars is calculated using a corresponding method.

If the vehicle has a rear window defrosting system and headlamp cleaners, 267 is deducted from the taxable value.

Furthermore, 2757 is deducted from the taxable value of a low-emitting passenger car with a spark-ignition engine.

However, certain age reductions are taken into account when calculating the taxable value.

Consequently, the car tax payable is not based on the purchase price of the imported car. Because the car taxation of used cars is based on tax-free prices of new cars in Finland and the age reductions are quite low, in practice car taxation of used cars is very high in Finland.

The Court considered that it was not clear whether the taxation of the car was made in accordance with Article 95 of the EEC treaty even though the car taxation was made in accordance with the Finnish Car Tax Act. According to the decision the District Customs Office was supposed to investigate whether the car tax imposed on the imported used car was higher than the tax included in the prices of the same kind of used cars in domestic markets. Furthermore, according to the decision the VAT collected on the basis of the car tax payable is not actually that kind of VAT mentioned in the Sixth Council Directive (77/388/EC). The directive is the basis of the Finnish VAT system.

The case is now before the Supreme Administrative Court of Finland and the Court has asked the opinion of the European Court of Justice. It has not yet given its decision.

Provided that the European Court of Justice considers the mentioned provisions of the Finnish Car Tax Act not to be in accordance with the EEC treaty it has been evaluated that not only the taxation of used cars but also the taxation of new cars will have to be changed in Finland. Otherwise, the amount of imported used cars will increase significantly and this has not been seen as a very desirable alternative.