Electric vehicle taxation: who’s leading the pack?

in Industry Insights, Tax, 09.02.2021

Incentives for a greener future

When we think about the future, fighting global climate change features high up on our list of priorities. As part of the 2016 Paris Agreement, most European countries are on board and working towards reducing greenhouse gas (GHG) emissions.

Some of the government efforts seen up until now focus on mobility decarbonization (achieved through “incentives and disincentives”) in order to drive population behavior towards generating less CO2 emissions.

With tax benefits and subsidies, most of the incentives put in place promote the use of eco-friendly cars and, in turn, the installation of charging stations.

Below we take a closer look at how companies and individuals with available tax incentives across Europe could shift towards more carbon-neutral mobility.

Incentives across Europe for the purchase/use of electric cars

Subsidies for the purchase of electric cars [1] (subject to conditions and excluding scrappage arrangements) Corporate income tax incentives for the purchase of electric vehicles (subject to conditions) Company car tax for electric vehicles (benefit in kind, if private use included)
France
  • Up to €7,000 and extra maximum €5,000 if you scrap your diesel car (older than 2001) or gasoline car (older than 1997)
  • Exempt
Germany
  • Up to €9,000
  • 0.25% of purchase price
Luxembourg
  • Up to €8,000 (for contracts signed no later than 31 March 2021) [2]
  • Deduction of expenses related to company cars
  • Investment Tax Credit (ITC) of up to circa 17% of the acquisition cost (made up of global ITC and complementary ITC)
  • 0.5% of purchase price
Netherlands
  • Up to €4,000
  • Additional tax deduction of 36% (MIA [3]) and 45% (EIA [4]) depending on the type of environmentally friendly asset or technology
  • 8% of purchase price
Sweden
  • Up to 60,000 SEK (c. €5,830)
  • 40% reduction
United Kingdom
  • Up to £3,000
  • (c. €3,330)
  • 100% deduction on the purchase price
  • Exempt

[1] Available for both individuals and businesses
[2]Luxembourg’s government informally confirmed the extension of this deadline
[3] Environment investment
[4] Energy investment deduction

 

The information displayed above clearly shows that there are already many jurisdictions across Europe that have introduced tax incentives for the purchase/use of electric cars.

These tax incentives are mainly subsidies for:

  • the purchase of electric cars
  • corporate income tax
  • deductions/tax credits upon the purchase of electric cars
  • incentives for the corresponding benefit in kind for individuals using an electric car

Some jurisdictions (UK, Netherlands and Luxembourg) opted to include all benefits, while others (Sweden, Germany and France) opted not to include corporate income tax benefits.

Check out our article from March 2019 for further guidance on tax incentives for greener transport in Luxembourg.

Incentives across Europe for the installation of charging infrastructures

Subsidies for the installation of charging infrastructure for businesses (subject to conditions) Subsidies for the installation of charging infrastructure for individuals (subject to conditions) Corporate income tax incentives for installation of charging stations (subject to conditions)
France
  • Up to 40% of the costs
  • Tax exemption for the benefit of charging the car on the employer’s premises
  • Company car owners charging at home can benefit from tax reductions
Germany
  • Up to €3,000 per installation depending on the region and up to €400 depending on the municipality
Luxembourg
  • 50% of the VAT cost of the purchase and installation capped depending on the parking spaces
  • Investment Tax Credit (ITC) of up to circa 17% of the acquisition cost (made of global ITC and complementary ITC)
Netherlands
  • Application and installation of a new public charging point are free
  • Additional tax deduction of 36% (MIA) and 45% (EIA) depending on the type of environmentally friendly asset or technology
Sweden
  • Up to 50% of the cost being the maximum cost per charge point of 10,000 SEK (circa €1,000)
  • Up to 50% of the cost being the maximum cost per charge point of 5,000 SEK (circa €1,500)
United Kingdom
  • 75% of all purchase and installation costs capped at £350 (circa €390) per installation
  • 75% of all purchase and installation costs capped at £350 (circa €390) per installation
  • 100% deduction on the set-up costs

 

To be congruent with this policy for the purchase and use of electric cars, some jurisdictions have also granted tax incentives for the installation of charging infrastructure (mainly subsidies and corporate tax incentives for the installation). Interestingly, both subsidies and corporate tax incentives are highest in the Netherlands.

Here in Luxembourg, the installation of charging stations could benefit from investment credit (8% for global investments or 13% for complementary investments) as long as requirements for its application are met.

Luxembourg incentive landscape

Incentives-wise, we see that Luxembourg is aligned with other EU jurisdictions. It is actually one of the most favorable jurisdictions for the purchase of electric cars based on all the incentives available to date.

There is of course still room for development. Many EU jurisdictions have already set up subsidy schemes for charging infrastructure, whereas direct subsidies for this are currently still lacking in the Grand Duchy. Available aid is only applicable to individuals and covers 50% of the VAT-exclusive price of the purchase and installation of the charging station.

KPMG Expertise

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Sources:

This blog has been written together with Louis Thomas, Telmo Ramos and Alejandro Merelles Rodriguez.