Norway to remove VAT exemption for pricey electric cars

The Norwegian Government followed up on plans to remove EV subsidies when it announced the revised budget this week. First to fall is the VAT exemption on electric cars costing more than 500,000 kroner (just under 49,000 euros) as of 1 January 2023.

The VAT for electric vehicles under the new scheme is dynamic, i.e. the more expensive an electric car is above this cap, the higher the VAT charge it incurs from next year. At the same time, Norway will launch a subsidy scheme to replace the VAT exemption.

“All-electric cars receive support at the bottom (of the price range), but the more expensive electric car you buy, the more VAT you have to pay,” Minister of Finance Trygve Slagsvold Vedum explained the measure. “Today, you can buy electric cars with a long range in all price ranges. We, therefore, believe that it is right that those who choose to buy the most expensive cars also pay some VAT to the community.”

The Norwegian paper The Local calculates that under the new subsidy scheme, buying an electric car with a price tag of more than 600,000 kroner will be charged VAT of 25,000 kroner, about 4%. Electric cars costing over one million kroner will incur 12.5 per cent VAT. Regular VAT in Norway is 25 per cent.

Norway’s electric car association has criticised the measure. “The entire electric car policy is at stake. It’s an incomprehensibly bad idea,” Christina Bu, general secretary of the association, told public broadcaster NRK.

Plans to change the EV policies had made news a week ago since the Norwegian Ministry of Transport considered abolishing or reducing privileges for electric vehicles in taxes and tolls in larger cities. The government said it wants to push ahead with the traffic turnaround – and not simply replace combustion engines 1:1 with electric cars.

“It’s great that people use electric cars. But it’s not good if people get into their cars and drive to busy urban areas instead of walking, cycling or using public transport,” the Minister of Transport, Jon-Ivar Nygård, said at the time.

Norway’s EV policies have made the country exemplary in EV adoption. While total registrations in Norway have declined by 15 per cent this year, electric cars have increased by 28.9 per cent compared to the same period last year. In April, 74.1 per cent of all new registrations in Norway were purely electric, in March even 86.1 per cent.

Electric cars purchased between now and the end of the year will be exempt from VAT, regardless of price. At present, the tax rate for electric vehicles is less than 50 per cent of the tax on comparable petrol or diesel cars, and the VAT exemption still applies.

The government says it will return to the scheme’s final design in the state budget for 2023.

thelocal.no, regjeringen.no (in Norwegian)