21 May 19

All but 3 EU members offer EV incentives

Almost all EU member states now offer some sort of fiscal incentive for EVs, a survey by ACEA shows. “That’s a big change from just a few years ago,” comments Erwin Boumans, partner and car taxation specialist at BDO. ‘But the offer varies widely and remains poor, especially in Eastern European member states.”

ACEA, the European Automobile Manufacturers’ Association, found that 25 out of 28 EU member states have fiscal measures in place to support vehicle electrification (actually 24, but Poland's measures will enter into force pending green light by the European Commission). “Only Croatia, Estonia and Lithuania have nothing on offer,” says Mr Boumans. 

Four categories
The overview produced by ACEA shows four categories of support:

  • Incentives (i.e. bonus payments or premiums paid by the government), available in just 12 EU member states; 
  • A range of deductions, reductions, exemptions, etc. (i.e. less or no tax to be paid) for the acquisition of EVs, available in 19 states; 
  • Similar measures for ownership of EVs, available in 20 states; and 
  • Similar measures for corporate fleets, available in 11 states (see overview at bottom of the article).

All that adds up to a very different picture, country by country. “Based on this overview, I’d say the countries that offer the most support for vehicle electrification are Austria, the UK and Ireland,” says Mr Boumans. 

Austria offers VAT deduction and tax exemption for the acquisition of zero-emission vehicles; tax exemption for owning zero-emission vehicles (private and corporate); and, until the end of 2020, an incentive scheme offering €1,500 for PHEVs and extended-range EVs (EREVs) and €3,000 for new BEVs and fuel-cell EVs (FCEVs). “Austria’s system is simple, clear and wide-ranging,” Mr Boumans says. 

Government grants
The UK offers tax exemption for the acquisition of BEVs and cars emitting <50g CO₂/km (until March 2021), tax exemption for ownership of zero-emission vehicles (private use), a minimum tax rate for zero-emission vehicles (corporate use), and dealer-based government grants of 35% on the purchase price of BEV cars (up to £3,500 – approximately €4,000) and 20% on BEV LCVs (up to £8,000 – app. €9,125). “As before, the UK offers significant grants – and doing it via dealers makes it easy for the end customer.”

Ireland offers a tax reduction for the purchase of BEVs (up to €5,000), PHEVs (up to €2,500) and hybrid EVs (HEVs; up to €1,500). The latter two offers are limited to the end of this year, the first one to the end of 2021. Ownership of EVs is taxed at the minimum rate of €120, and there are purchase incentives up to €5,000 for PHEVs (until the end of this year) and BEVs (until end 2021). Boumans: “Ireland has an excellent system – that, at first sight at least, unfortunately offers nothing specifically for company cars.”

It’s remarkable that many measures – especially among the incentives – are time-limited. “On the one hand, this is understandable: governments want to stimulate EV introduction but set an end date to keep the measure from becoming unaffordable. Or they don’t set an end date, but soon discover that it is becoming unaffordable – and abolish the measure. That’s why we at BDO advise fleets never to base their EV buying strategies on government incentives.”

CO₂ element
What also strikes Boumans, looking at the ensemble of national pro-EV measures: “CO₂ remains an important element of taxation, but not as important as before. We’ve had Dieselgate, and as a consequence people have turned more to petrol. But then there is the rise of low-emission zones, excluding many if not most fossil-fuel vehicles. People are at a loss. But the overall trend is clearly towards more EVs.”

However, even calculating in these various fiscal advantages, the business case for electric is still not entirely sound: “If you examine the Total Cost of Ownership, you see that tax advantages, government grants and other measures often are not enough to close the gap with the purchase price for EVs, which remains significantly higher. Another TCO element is that the second-hand market for EVs is not yet fully developed.”

The price differential explains why EVs have a much lower penetration in the poorer EU member states, says Boumans: “Not only is the initial price a lot higher than for diesel or petrol cars, it’s also relatively more expensive for the local governments to offer incentives. I think we’ll have to wait for lower EV prices – and better charging infrastructure – before electrification has a chance of taking off in Eastern Europe.”

WLTP impact
A major influence on EV acceptance will be the full impact of WLTP, which will reach its peak next year. Corporates are expected to pay a lot more in taxes as the ‘fiscal’ CO₂ emissions of their fleets are adjusted up, from the more lenient NEDC measurement system formerly in operation. While that may push some fleets even more firmly towards electrification, Mr Boumans repeats his warning against trusting too much in incentives.

“What fleets need, apart from fiscal simplicity, is fiscal certainty. The Netherlands, for one, offers the guarantee that fiscal measures will continue to apply on EVs, for their entire first life.”

The main message, however, is that all manner of fiscal benefits for EVs (be they deductions, incentives or otherwise) are, in the end, temporary: “Governments can’t resist the urge to treat cars as cash cows. You can be sure that, once fossil-fuel cars have been marginalised or abolished, they will find a way to introduce a tax, especially for electricity for cars.”

“Irrespective of the choices that will need to be made in relation to the powertrain of the future”, Mr Boumans adds that “more and more companies understand that a broader mobility approach is necessary, in order to tackle the mobility needs and challenges of the future."

Pro EV measures for company cars

11 EU member states have offered fiscal advantages for the electrification of corporate fleets. “Portugal, Austria and Belgium have very good systems,” says Boumans. An overview:

  • Austria

Exemption for zero-emission cars.

  • Belgium

120% deductibility of zero-emission cars under corporate tax of expenses (until end of 2019; thereafter 100%).

  • France

Exemption from CO₂-based tax component for vehicles emitting less than 20 g/km.

  • Germany

Reduction of the taxable amount for BEVs (from 1% to 0.5% of the gross catalogue price per month). 

  • Hungary

Exemption for BEVs and PHEVs.

  • Latvia

Minimum rate (€10) for BEVs.

  • Luxembourg

Minimum rate for BEVs and FCEVs (fuel-cell EVs).

  • Netherlands

Minimum rate (4%) for zero-emission cars.

  • Portugal

Exemption for BEVs.

  • Sweden

Reduction for BEVs and PHEVs of 40% (up to SEK 20,000 – app. €1,850).

  • UK

Minimum rate for zero-emission vehicles.

Authored by: Frank Jacobs