Electric-car Buyers to Get Thousands of Shekels in Tax Benefits From Israeli Government

New incentive involves lowering purchase tax on vehicles that pollute less, resulting in a saving of NIS 6,000 to NIS 10,000 for car buyers.

Motorists who buy electric-powered cars and some hybrid cars are to get additional tax benefits in a bid to encourage more Israelis to purchase these greener models, Finance Minister Yuval Steinitz announced on Sunday.

The new incentive involves lowering the purchase tax on certain vehicles that pollute less than standard internal-combustion vehicles, resulting in a saving of NIS 6,000 to NIS 10,000 for car buyers.

Better Place's electric car in a test drive near Jerusalem.
Emil Salman

Under the new policy the tax on electric cars is being cut from 10 percent to 8 percent this year and next.

When it comes to hybrid cars, which run on a combination of electricity and gasoline, purchase tax will remain at 30 percent, but it was slated to go up to 45 percent.

Cars that run on a combination of gasoline and rechargeable batteries, which are called "plug-in" vehicles, will be subject to a lower, 20 percent purchase tax this year and next - a rate that will then gradually increase.

Finance Ministry officials say the benefits for Israeli car buyers who take advantage of the incentives are collectively worth NIS 130 million over the next several years.

Initial pro-environment tax rates were introduced about three years ago. The newly announced incentives are expected to result in cleaner air, with incidental benefits to the country including, for example, lower medical costs for respiratory illnesses.

Hybrid vehicles emit up to 50 percent less air pollution. Use of battery-powered vehicles can result in even more substantial pollution reduction, but the extent of the improvement depends on the source of the electricity used to power the cars, taking into account pollution generated at the electric power plant. Electric cars themselves, however, don't emit air pollution and therefore result in immediate benefits in urban areas, where air pollution is a major cause of illness and even death.