Saturday 28 January 2023

Electric cars would continue to be tax-exempt until 2034

The idea is to continue the benefits introduced in 2019 on taxes such as VAT, selective consumption and Marchamo since Costa Rica is far from reaching the goal of 37,000 units set for 2023

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28 January 2023 - At The Banks - BCCR

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QCOSTARICA – A bill being discussed by lawmakers would extend until 2034 tax exemptions to promote the purchase of new electric vehicles in Costa Rica. The plan received sufficient political support to advance to the plenary session of the Legislative Assembly.

Costa Rica’s Congress seeks to encourage the use of electric cars to reduce emissions, the country’s main environmental problem.

The idea is to give continuity to the benefits implemented in 2019 with the Ley de Incentivos y Promoción para el Transporte Eléctrico (Incentives and Promotion Law for Electric Transportation), which expires in 2023.

To date, 4,200 electric vehicles circulate in the country, among them passenger cars, motorcycles, buses and forklifts, a figure that is far from the goal of 37,000 units set for when current legislation expires.

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The initiative promoted by legislators Roberto Thompson and Paola Valladares, of the Partido Liberaciion Nacional (PLN), would not only extend the current incentives for ten more years, from 2024 to 2034 but would also change the exemptions of VAT taxes, vehicle ownership, selective consumption and customs value.

Likewise, the initiative eliminates the cap that today prevents granting tax incentives to the importation of private vehicles valued at more than US$60,000, such as buses or vans for tourism, as well as trucks for cargo transportation. The owners of these vehicles currently only receive a discount on the payment of the right of circulation (Marchamo).

The Ley de Incentivos al Transporte Verde (Green Transportation Incentives Bill) was approved by the Special Infrastructure Committee of the Legislative Assembly. The proposal is ready to be voted on in first debate when it enters the agenda in the legislative plenary.

Legislator Valladares argued that the plan is necessary because the results of the current incentives are not encouraging, with a view to the objective of massifying electric vehicles to reduce oil consumption, “as a complementary measure to that integrated transport that should have as a country”.

The automotive fleet is the main source of polluting emissions in Costa Rica, so its transformation is the main environmental challenge.

The country’s transportation system is the most polluting in Central America, according to the most recent State of the Region report. Vehicles are responsible for burning 84% of hydrocarbons, which makes it almost impossible to reduce polluting emissions while the current model persists.

Poor public transportation encourages the use of private vehicles. Up to 100,000 vehicles travel daily on the General Cañas, the main route into and out of San Jose.
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The current law exempts from the 13% Value Added Tax (VAT) electric vehicles with a CIF value (cost, insurance and freight) lower than US$30,000 when imported and a 50% exemption to those valued between US$30,000 and US$45,000.

With respect to the Marchamo, currently, whoever buys a new electric car does not pay property tax in the first year, while in the following four years it is deducted 80%, 60%, 40% and 20%, respectively, until in the sixth year should pay the full tax.

With current legislation, electric cars with a CIF value less than US$30,000 are exempt until 2023. For those between US$30,001 and US$$45,000 it is 7.5% and for those from US$45,001 to US$60,000, 15%. Vehicles with a CIF value do not have any tax benefit.

 

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