Tax Relief

Name to restrict the tax relief for electrical autos to € 40,000

The tax breaks for electric vehicles are to be extended beyond the end of the year, but according to the proposals of the Tax Strategy Group (TSG), they should only apply to cars under 40,000 euros.

The exemption from vehicle registration tax (VRT) of up to € 5,000 for electric vehicles is due to expire at the end of 2021. However, the government advisory board has called for this to be extended beyond this deadline, while the current threshold of € 40,000 should be reduced to € 30,000 from next year.

The VRT relief of € 5,000 for electric vehicles is currently starting to expire from € 40,000 to € 50,000. According to the new proposals, this would mean that a new electric car from a price of 30,000 euros would receive the full relief of 5,000 euros, but new or imported cars from a price of 40,000 euros would not benefit from the tax break.

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The Group’s paper on climate change and taxation also discusses broader changes to the VRT system, with rates increasing between 2 and 5 percent for vehicles with emissions above 101 g / km, resulting in a peak rate of 42 percent in car emissions 191gCO2 / km and more.

The group’s paper also notes that the CO2 tax increases, which will apply from October 13, 2021, will increase 2.5 cents on a liter of diesel and 2.1 cents on a liter of gasoline.

Accordingly, the group calls for a gradual reduction in the excise tax difference between gasoline and diesel, which is currently 11.6 cents per liter. “While the lower consumption tax on diesel was originally intended to support companies that rely on diesel as a fuel, it also contributed to the spread of private diesel vehicles,” said TSG.

The paper also states that “the phasing out of fossil fuel subsidies such as the diesel rebate scheme – which was introduced to support the road haulage and passenger transport sectors – is necessary for the transition to a more sustainable future”.

Among other recommendations, the paper suggests expanding the VRT tariffs for commercial vehicles to include emission-based criteria “that provide an ecological justification and tie the system to the polluter policy”.

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Regarding benefits in kind (BIK) for workers, the paper states that changes to the new BIK rates, slated to start in 2023, could be considered.

She suggests weighting tariffs more heavily in terms of discounts and surcharges based on a car’s emissions profile in order to encourage the diffusion of electric vehicles.

With regard to the zero BIK rate for electric vehicles, while the Ministry of Transport is in favor of extending this rate for a further three years, the group suggests that each extension could be coupled with a lowering of the threshold. For example, it suggests lowering it to € 40,000 in the first year, € 30,000 in the second year, and € 20,000 in the third year before it expires in late 2025.

The Tax Strategy Group is led by the Treasury Department, which includes senior officials and policy advisers from a number of public service departments and offices.

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