Electric cars: good for the planet, but also for the Austrian tax authorities

In Austria, drivers of electric cars currently enjoy several tax advantages compared to drivers of cars with internal combustion engines. Only cars with a CO2 emission value of 0 grams per kilometer qualify as electric cars under Austrian tax law. Hybrid vehicles and electric vehicles with range extenders do not meet this condition and are therefore excluded from most tax relief (unless specifically stated otherwise). The benefits of electric cars extend to many different areas of Austrian taxation:

1. No taxes on classic cars

Electric cars are exempt from classic “car taxes” such as motor vehicle tax or standard consumption tax (standard consumption tax).

2. Special rules for paying VAT

When it comes to VAT, electric cars – unlike most other cars – are generally VAT deductible. Normally, the deduction of input VAT for cars is only possible in certain cases, such as carriers, leased cars or taxi companies, among others. However, while non-electric cars are only eligible for input tax credit in these specific cases, electric cars do not need to fulfill a special business purpose, provided they are 100% electric. The actual amount of VAT deduction depends on the purchase price of the car. If it is below €40,000 (incl. VAT), the full amount of VAT can be deducted. In the range of EUR 40,000 to EUR 80,000 (incl. VAT) a full VAT deduction is still possible, but VAT on self-delivery must be taken into account for amounts above EUR 40,000 (see example calculation below). Finally, if the purchase price exceeds €80,000 (incl. VAT), no VAT deduction can be made.

Example calculation (purchase price between EUR 40,000 and EUR 80,000):

Mrs X buys a 100% electric car for €60,000 incl. VAT. An input VAT deduction of EUR 10,000 (60,000 – 60,000/1.2) can be made for this purchase (based on the full amount). The part above €40,000 (€20,000 including VAT in this example) is subject to VAT as self-delivery. However, the amount of VAT contained in the €20,000 is not subject to VAT on self-delivery. Therefore, the VAT chargeable basis is EUR 16,666.67 (EUR 20,000/1.2) and the VAT amounts to EUR 3,333.34 (EUR 16,666.67*0.2). Therefore, the input VAT deduction in this case is EUR 6,666.67.

3. Income tax and payroll taxes

Furthermore, while non-electric cars generally have to be depreciated on a straight-line basis over eight years under Austrian income tax law, electric cars can be depreciated down to 30% per year, meaning that businesses are allowed to depreciate over – a high amount at the beginning of the use of the electric car.

Electric cars are also very suitable for use as company cars. If the employer provides its employee with a car and allows the use of the car for personal purposes, this is usually treated as taxable remuneration in kind up to €960 per month. However, if the car provided to the employee is an electric car, the Austrian legislator qualifies the value of this remuneration in kind as €0. Therefore, if the employer provides the employee with an electric car for personal use, both the employer and the employee do not have to pay any additional payroll tax liabilities.

4. No direct price increases due to CO2 tax

The new CO2 tax was the centerpiece of Austria’s eco-social tax reform with the stated aim of putting a price on greenhouse gas emissions. As solar, wind and hydropower are not directly affected by the CO2 tax, electricity obtained from these sources is exempt from the CO2 tax. Therefore, if a company operates all-electric cars with electricity from renewable energy sources, the car fleet avoids the CO2 tax. In this way, the green vehicle fleet is not only environmentally friendly, but also cheaper thanks to the avoidance of the price increases associated with the CO2 tax.

5. Investment tax relief

Another incentive to switch to electric cars is the new investment tax credit for green investments. This affects environmental assets that are acquired/produced as of January 1, 2023. The investment tax credit provides for a business expense of up to 15% of the cost of acquiring/producing certain environmental assets, including electric cars.

As the advantages of electric cars with a CO2 emission value of 0 grams extend to many different areas of the Austrian tax, it is wise to deal with these aspects before purchasing such cars.

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