Finance Minister Bezalel Smotrich announced (Monday) a significant decision to halt the dramatic increase in purchase tax on electric vehicles, which was expected to reach 83% in January 2025. The move aims to sustain the viability of transitioning to electric vehicles in Israel while maintaining fiscal balance. Instead of the planned increase, the tax will be set at only 45%.
The decision comes in the context of a tax framework that began in December 2019, under which the purchase tax on electric vehicles gradually increased. In January 2023, the tax was only 20%, and by January 2024, it had risen to 35%. The original plan was to equalize the taxation with that of internal combustion engine vehicles, but the new decision alters the direction to encourage continued transition to green transportation.
Less Pressure on Buyers
According to the original plan, the tax would have risen to 83% by 2025, resulting in a price increase of tens of thousands of shekels. Take the following example, a consumer purchasing a vehicle priced at 150,000 NIS before tax, would pay 275,000 NIS, while currently with a tax of 45% the price will. be set as 217,500 NIS, allowing for relative affordability.
In conclusion, the tax reduction will alleviate the economic pressure on electric vehicle buyers, encourage new purchases, and sustain the momentum of the transition to green transportation in Israel.
