Incentives Boost E-car Adoption but Raise tax Uncertainties
An electric Skoda Enyaq tops up at an Ionity multiple charging station in Budapest. The provision of such infrastructure is one of the keys to accelerating EV take up.
Photo by kasakphoto / Shutterstock.com
Incentives and benefits created to bolster the broader adoption of electric vehicles are helping lift sales. But as rules and regulations struggle to keep pace, they come with tax uncertainties and cumbersome administration, Deloitte Hungary experts tell the Budapest Business Journal.
The spread of electric cars on the Hungarian roads is becoming ever more prominent. But as with any new, expensive technology, it is incentives that lift sales. When buying EVs, incentives come in many forms: tax benefits, tax exemptions and non-refundable state subsidies. Nevertheless, questions and uncertainties often surround such interventions.
Deloitte Hungary, one of the local units of the Big Four consultancy firms, says Hungarian government subsidies (in the HUF 1.5 million-2.5 mln range, dependent on the final price of the vehicle) for purchasing electric cars have proven successful. The benefit is available through auto dealers registered with the government. But Deloitte warns about the importance of handling proper invoicing. Incomplete or incorrect invoicing on the car dealership side can result in the refusal of state aid, meaning traders must be alert.
Another incentive for boosting electric car purchases is an exemption from paying the one-time registration and company car taxes. Such an incentive stimulates both e-car buys and the economy at large. But the scope is not the same, Deloitte Hungary warns; the one-time registration tax exemption only applies to fully electric cars, while the corporate car tax exemption includes environmentally-friendly hybrid rides too.
As more electric cars silently vroom the roads, the servicing infrastructure is also expanding and developing. Charging stations are springing up in public areas, gas stations, shopping centers and office parking lots.
Beyond the increasing market demand, the ability to reduce the corporate tax base further supports this expansion, says Zoltán Gábor, a director at Deloitte Hungary. He adds that a corporate tax discount is also available if equipment investment, renovation or operations support improved energy efficiency.
EV adoption can be accelerated by “perks” such as free charging at workplace facilities, dedicated parking bays for non-internal-combustion engine automobiles, and even by the fact that electric rides are becoming an increasingly popular option for car-sharing service operators. In this context, the support of e-car adoption with incentives and benefits is not welcome but a must.
Employers may also consider supporting the home charging of corporate electric cars. But first, terms and conditions must be clarified, such as tracking whether the car’s charging goes toward corporate or private use.
Questions and uncertainties undoubtedly follow in the wake of the speedy expansion of electric vehicles. Like any new technology, the electromobility sector has grown so fast that legislation and legal practice has not yet been able to catch up, says Béla Dan, a senior tax consultant at Deloitte Hungary.
Uncertainties abound; the classification of e-car charging itself is still being debated: is it a product or a service? Prompt categorization is crucial for determining the correct tax treatment, and wrongly made decisions in this regard may carry a significant risk for taxpayers, the consultancy warns.
Deloitte Hungary cautions that if electric charging of cars is categorized as a service, certain value-added tax exemptions can apply, although with limitations. If, however, the classification is tagged as a product, it will not fall under the VAT exclusion scheme but may be attractive on the user side for free charging options. Still, it will create significant extra spending in taxes for companies who opt to give the benefit to their employees as an incentive.
Even assuming that electric charging is correctly classified, Deloitte Hungary said, further questions may arise in the constantly evolving market. As competition in electromobility increases, it creates additional uncertainties in handling transactions between sector players and the taxation that should be applied to them. With EVs gaining ever greater popularity (an inevitability given net-zero commitments to phase out carbon-fueled engines), Dan urges that legislation focuses on addressing taxation issues to avoid risks.
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This article was first published in the Budapest Business Journal print issue of July 15, 2022.
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