Israel Enacts Surprise Tax Hike on Luxury Electric Cars

June 11, 2018 Taxation in Israel

TeslaTEL AVIV – Consumers buying luxury electric cars in Israel have received an unwelcome surprise in the form of a tax hike.

Over the weekend the Minister of Finance of Israel Moshe Kahlon announced that an order has been signed to hike the taxes imposed on the sale of luxury-level electric vehicles sold in the country.

Previously, electric cars bought in Israel would face a purchase tax of 20 percent, while hybrid vehicles would face a tax rate of 30 percent.

However, following the new order, the rate of purchase tax on both vehicles types will rise to 34 percent and 44 percent for electric and hybrid vehicles, respectively, for vehicles with prices exceeding ILS 300 000.

It is believed that high-end electric vehicles made up nearly half of all sales of electric cars and hybrid cars over the last two years, leading to a loss of millions in potential tax revenues.

The tax was announced with very little forewarning, as it the government hoped to stop any build-up of stocks or sales prior to the enactment of the tax.

The new tax is meant to reflect the tax treatment seen when any other luxury car is sold in Israel, regardless of whether it is a traditional combustion engine or an electric car.