Taxing electric mobility
In its coalition agreement the new Federal Government has rightly come out in favour of continuing to foster electric mobility. The Government is sticking to its target of having one million electric vehicles on Germany’s roads by 2020. The VDA therefore supports the objectives of the “National Platform for Electric Mobility” (NPE) and is working towards improving the overall taxation conditions for electric vehicles.
The previous parliament already implemented two measures to encourage the market ramp-up of electric vehicles: adjustment of the taxation of private use of company cars, and extension of the exemption from motor-vehicle tax for electric vehicles. The compensation via the taxation of company cars came about through a gradual reduction in the gross list price for electric vehicles and for externally rechargeable hybrid electric vehicles (Section 6(1) no. 4 sentences 2 & 3 of the German Income Tax Act [EStG]). For motor vehicles acquired before the end of 2013, the applicable gross list price is reduced by 500 euro per kilowatt hour of battery capacity. The total reduction may not exceed 10,000 euro per vehicle. For vehicles acquired in the following years the amount decreases by 50 euro per year for every kilowatt hour of battery capacity. The maximum amount of 10,000 euro decreases for vehicles acquired in the following years by 500 euro per year. There is a time limit on the compensation for acquiring electric and hybrid electric vehicles by the end of 2022. The German Federal Ministry of Finance has answered questions concerning application in a document dated 5 June 2014, which includes some practical notes from the VDA.
There is another important improvement in the motor-vehicle tax levied on electric vehicles: the full exemption from motor-vehicle tax for pure electric vehicles registered before the end of 2015 has been extended from five to ten years (German Law amending the traffic taxation regulations [VerkStÄndG] of 5 December 2012). Vehicles that are first registered in the period from 1 January 2016 to 31 December 2020 will still be exempt from motor-vehicle tax for five years. Furthermore, the exemption has been widened to apply to additional vehicle categories. The extension of the tax exemption period sends out an important signal that – in conjunction with other measures – creates incentives to purchase environmentally friendly electric vehicles.
Despite the tax measures already implemented, there is still a need to adjust the overall tax conditions for companies procuring electric cars. A crucial factor for the market ramp-up in the next few years will be providing the right impetus. In the next coming years at least, commercial customers will only buy electric vehicles if there are additional incentives. The VDA supports the proposal from the “National Platform Electric Mobility” (NPE) of introducing a special form of depreciation for commercially used vehicles amounting to 50% in the first year of use. The special depreciation would be a proven market-based instrument for making electric mobility attractive to a larger circle of companies. This will also take account of the technological development in electric vehicles that greatly accelerates innovation.
Action has to be taken in other areas, too – which the VDA has pointed out to the fiscal authorities. For example, we still need practicable taxation regulations for the electricity used to charge vehicles. Employees, who are not allowed to recharge their private e-vehicles on the employer’s premises, because tax is levied on the electricity as a benefit-in-kind, are “lost” as far as the fast market ramp-up is concerned. A solution is also needed for electricity tax in order to avoid bureaucracy. The fiscal authorities should find a pragmatic approach to such topics, as they did for the private use of company PCs installed in offices years ago.