Following consultation with the Israel Tax Authority, Minister of Finance Moshe Kahlon has signed an order permanently imposing higher purchase tax rates on luxury vehicles. The temporary order was extended several times, with the current extension due to expire at the end of this month. For the first time, the new order also imposes the special luxury vehicle purchase tax on electric and hybrid powered vehicles. This means that luxury electric vehicles costing over NIS 300,000 will bear extra purchase tax of up to 14%.
These vehicles will continued to benefit from reduced purchase tax as do all electric vehicles, but instead of a tax ceiling of 20% for a plug-in vehicle and 30% for hybrids, the ceiling will be 34% for plug-ins and 44% for hybrids on the cost of the vehicle over NIS 300,000. The short notice for the order is intended to prevent build-up of stocks and a rush of vehicle deliveries.
In the past two years, prestige plug-in cars have led sales in the luxury market because of the tax benefits they carry, estimated at tens to hundreds of thousands of shekels per car. The cost of these tax benefits amounted to hundreds of millions of shekels annually to the Ministry of Finance. Almost 50% of sales in the luxury segment were of cars of this type.
In September 2013, an order was first applied to any vehicle with a list price of over NIS 300,000. Purchase tax rose gradually the higher the price over NIS 300,000.
The tax rate resulting from the combination of the basic rate and the luxury vehicle supplement is a regular tax rate to which all existing rules apply, so that a vehicle costing over NIS 300,000 continues to benefit from tax reductions in accordance with its pollution rating and safety accessories.
The new order is likely to hit particularly the personal car import sector, which in the past two years has largely focused on luxury plug-in hybrid cars, because of the tax benefits and the especially high profits made by importers on these cars.
Published by Globes [online], Israel business news - www.globes-online.com - on June 10, 2018
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