Sunday 22 May 2022

Legislators propose to exempt new and used electric cars from taxes for 12 years

The bill would also extend exemptions to used electric cars not more than five years old, which were left out of the current tax benefits.

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QCOSTARICA – Before the end of their term, on May 8, legislators expect to approve the Green Transportation Incentives bill (ley de Incentivos al Transporte Verde), with the purpose of extending tax exemptions for electric cars until 2034.

The bill would also extend exemptions to used electric cars not more than five years old, which were left out of the current tax benefits.

The current benefits package, which expires in 2023, was insufficient to reach the goal of having 37,000 electric cars for the coming year; Fewer than 2,300 are currently in circulation.

For this reason, legislators agreed to contemplate an extension within the priorities in the closing agenda of the 2018-2022 Congress.

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Legislators Roberto Thompson and Paola Valladares, of the Partido Liberacion Nacional (PLN), promoters of the initiative, stated that the proposal takes on greater prominence at a time when fuel prices continue to rise.

“This project ensures a much longer-term in the effort that the country has to make to decarbonize the economy, but, in addition, the current situation of rising oil prices, which we do not know for how long it will last, obviously should be an additional motivation for a country that generates practically all its energy from renewable sources to take advantage of this opportunity.

“So I believe that it goes along both lines: not allowing this to expire in the very short term, which would be next year, and that high gasoline prices also be an additional incentive; that people can have access to an electric vehicle,” said Thompson.

For his part, President Carlos Alvarado said he was not aware of details of the initiative, but expressed being in favor of a reduction in taxes on electric vehicles.

“I do not know the details of the project, so as not to refer to the specifics, because it would have to be seen. What I can say is that I am in favor of expanding the reduction of taxes on electric vehicles, especially to be able to make the transition,” stated the President.

Alvarado also asked the automotive sector to prioritize the importation of lower-cost electric cars over luxury options, so that more Costa Ricans can acquire a sustainable vehicle.

Exemptions for electric cars

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The Green Transportation Incentive Bill contemplates four tax exemptions for new and used electric cars, with an age of no more than five years. The benefits extend to the importation of batteries and other parts used by these vehicles.

  1. VAT. The proposal establishes a preferential Value added Tax (IVA or impuesto sobre el valor agregado in Spanish) rate for those who buy an electric vehicle regardless of its value. In the first year of validity of the law, 1% VAT will be paid. That amount will increase by one percentage point until it reaches 13% or the VAT rate in effect at that time.
  2. Discount on the Marchamo. The property tax, which is paid annually as part of the Marchamo (circulation permit), will be total the first year the legislation is in force. Subsequently, the discount will decrease 20% each year until the benefit expires and the owner must pay 100% of the amount corresponding to said tax.
  3. Selective consumption. The initiative promotes a staggered rate for this tax for a period of 12 years. Electric cars will be completely exempt from the selective consumption tax during the first three years of the law’s validity. The rate will rise 7.5 percentage points every three years, until reaching the current rate of 30% for this tax.
  4. Customs value. The same mechanism will be implemented for the payment of this other tax when importing any electric technology vehicle. The first three years the exemption will be total, then it will rise 0.25 percentage points until reaching the current rate of 1%.

 

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