The final version of the new "green tax" on motor vehicles was presented yesterday by the finance and environmental protection ministries.
The plan, first presented in January 2008, has been polished and tweaked, and is now offered in its final form in time for the August 1 tax assessment.
According to the new program, purchase tax on all cars will increase from 72% (as had originally been planned for 2010) to 92%, with special exemptions worth up to NIS 15,000 for low-emission cars.
Hybrid and electric models will enjoy lower purchase tax. In addition, the new plan calls for a graduated taxation scale on the value of use of company vehicles.
Your Mazda 3 will cost NIS 3,000 more
The Tax Authority estimates that the new tax will bring in NIS 400 million next year, equal to about 5% of tax revenues from car imports in 2008.
The tax is to be based on a "green index" that factors in greenhouse-gas and polluting emissions of carbon dioxide, nitric oxides and carbon monoxide and award "green grades, " or scores, to all passenger vehicles.
These grades are divided into 15 groups that form the basis for awarding buyers exemptions of up to NIS 15,000 on purchase tax.
The sales tax rate will effectively increase only for green index tax groups nine or above.
Tax on Toyota's Yaris model, for instance, which enjoys a group 4 pollution index, will drop to 58%, and tax on Honda Civics will decrease to 70%.
Israel's best-selling model, the Mazda 3, on the other hand, will be in the 80% purchase tax bracket, and buyers will pay a 87% purchase tax on their new Nissan Qashqais, raising the retail price for the model by thousands of shekels.
Electric and hybrid cars will enjoy additional, although temporary, tax exemptions: Electric cars will carry a purchase tax of just 10% until 2014, when the tax will rise to 30%, and in 2020 will be taxed like any other vehicle. Hybrid cars will be taxed just until 2012, then increasing gradually until they are on par with all-gasoline or all-diesel engines.
Diesel-engine cars fitted with particulate filters will carry a tax exemption of NIS 4,000.
The Tax Authority is also canceling the value of usage groups that have defined the tax bracket for users of company cars up until now, replacing them with a continuous scale based on the price of the vehicle.
Company car users will have to pay income tax on an amount equal to 2.75% of the vehicle's value (new).
The new scale means that company car users will now be paying more for vehicles worth up to NIS 111,000, but company cars with a purchase value more than that will actually be cheaper now for the drivers.
Will the reform affect existing vehicles?
There will be no direct affect on vehicles that are already on the road or which have been released from customs by July 31. The incentive mechanism involves the purchase tax paid on release of an imported vehicle from customs and the payment of import tax. There could be an indirect affect on the used-car market.
Where can I find information on vehicle emission and fuel efficiency ratings?
Comparative data on pollutant emissions for the various models and their "green grade" as reported by car importers will be published on the Web sites of the transportation and environmental protection ministries, as well as that of the Tax Authority within the Finance Ministry. In addition, dealers will be required to publish fuel consumption and emission data in advertisements for the vehicle in question and at sales points.
How is the pollution grade for each car determined?
The grade is determined by calculating the values of five different vehicle emissions that are harmful to the environment and health: nitrogen oxides, carbon monoxide, hydrocarbons, particulate matter and carbon dioxide.
Will hybrid vehicles enjoy special benefits under the reform?
Yes, hybrid vehicles whose green grade does not exceed 130 points will be subject to purchase tax of 30% instead of 92%, instead of the benefit awarded to the group - similar to the current tax rate. In addition, an employee using a hybrid company car (regardless of the emission grade) will get a NIS 500 reduction in tax for use over a gasoline or diesel powered car of similar value.
Will the purchase tax reform apply to heavy vehicles (over 3.5 tons)?
At present the reform does not apply to vehicles over 3.5 tons, due to lack of reliable emission measurements for these vehicles. Nevertheless, the reform offers tax incentives for hybrid trucks and buses, in the form of accelerated depreciation rates.
Will the reform apply to two-wheeled motor vehicles (such as motorcycles and scooters)?
Not at this stage, mainly because of the seemingly limited benefit of including these vehicles in the reform. This position will be reassessed over the coming year. However, advertisements and sales points will be required to include information on fuel consumption and emissions for two-wheeled vehicles.
Will there be any change in the taxes on the car currently in my use?
No, the changes apply only to vehicles that are registered after January 1, 2010. The current method of taxation, based on price groups, will continue. To clarify, the existing method that was implemented in 2008 will continue to be in force until 2011.
How will the value of use of a company car be calculated for hybrid vehicles?
Like that of standard fuel vehicles: based on the vehicle's value, less a fixed amount of NIS 500.
Where can I find value-of-use tables for company cars for tax purposes?
On the Tax Authority Web site, at http://ozar.mof.gov.il/taxes
Will the value of use (for income tax purposes) be less for used vehicles?
No. As is currently applied, the value of use will be based on the vehicle's value when new.
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