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Norway Replaces Electric Car VAT Exemption With Special Subsidy

January 16, 2023

Norway plans to remove its VAT exemption on electric vehicles. However, a new subsidy scheme aims to keep prices lower on all but the priciest electric cars. The new system is designed to be fairer to all consumers.

The Norwegian government has decided to end the VAT exemption for EVs. To encourage the widespread use of EVs, however, a new mechanism is being developed. The VAT exemption will be replaced with a subsidy scheme as of January 1, 2023.

Government VAT Rebates Drive Electric Vehicle Sales

Surprisingly, the VAT program has been a huge success. In September of 2021, electric cars accted for over 80% of all vehicle sales in the nation. Compared to the same month the year before, that's a huge jump.

The present policy provides a VAT exemption for electric automobiles. In contrast, gasoline and diesel cars are subject to a 25% tax increase and new pollution fees.

What Groups Stand to Gain the Most From VAT Exemptions?

Although it may seem like a good idea to exclude electric vehicles from value-added tax, experts are divided on whether or not this is the best approach. In an IMF working paper, for example, it is said that VAT subsidies help the rich more than the average person.

The Norwegian government has considered taxing electric cars with a price tag of more than NOK 600,000 in order to solve the problem.

The New Electric Vehicle Subsidy in Norway

The new incentive program for electric vehicles is similar to a VAT exemption of up to NOK 500,000. As a result, the new plan will have an impact on the cost of high-end EVs.

Price increases for any electric vehicles sold in Norway at or below NOK 500,000 will be prevented under the program.

Lawmakers revise the value-added tax rules often to accommodate the needs of the modern economy. For this reason, it is essential that you have access to a flexible, comprehensive VAT compliance solution that is backed by cutting-edge VAT technology.

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