Tax incentives for electric vehicles
In contrast to conventional cars, numerous tax incentives and support schemes are already available for electric cars used in companies. Tax incentives have been further expanded over recent months.
The following overview summarises the key incentives relating to electric vehicles (the rules are partially different for hybrid vehicles), in accordance with existing and new regulations.
- With regard to VAT, input tax is fully deductible on the purchase of new electric vehicles for business use costing up to €40,000. For vehicles with an acquisition cost of between €40,000 and €80,000, business owners can deduct input tax on the first €40,000 of the cost in full, while input tax based on the remaining acquisition cost can be neutralised by means of own use taxation. No deduction of input tax is permitted for acquisition costs exceeding €80,000. In business terms, this means input tax deduction on purchase of an electric vehicle is capped at €6,666.67 (€40.000/120x20). This applies analogously to electric car rental or operation costs. Electricity costs for charging electric vehicles are fully input tax deductible, even in the case of vehicles with acquisition costs exceeding €80,000.
- In addition, electric vehicles are exempt from vehicle registration tax and performance-based insurance premium tax.
- For electric vehicles purchased on or after 1 July 2020, as an alternative to straight line depreciation for tax purposes, the diminishing balance method can be applied using a rate of up to 30%. This percentage rate is applied to the respective carrying amount (residual value), allowing beneficial tax effects to be recognised early.
- If a company electric vehicle is used by an employee for private purposes, taxation as non-monetary remuneration does not apply, and the employer does not have to pay related employer contributions (social security, family compensation fund, additional employer contribution, or municipal tax). And no fringe benefit needs to be recognised when employers offer free charging for electric vehicles owned by employees.
- Companies can also receive financial support for investing in electric vehicles in a broad range of categories, from a variety of support programmes.
There are numerous (tax) incentives in place for purchasing an electric vehicle, making such an acquisition undoubtedly worthwhile in individual cases; however, it is important to be aware of certain aspects of these incentives.