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Tax and Fee Incentives for Green Vehicles Promotion

  • Published on November 11, 2019
In 2013-2015 a number of tax deductions and exemptions related to the environmental characteristics of the vehicles have been introduced. With the adoption of an amendment to the Local Taxes and Fees Act (LTFA) (entered into force on 01.01.2013) the first step was taken in this direction, by exempting the electric cars from annual vehicle tax. With other amendment to the LTFA (entered into force on 01.01.2014) exemptions were granted to owners of vehicles meeting the Euro 3-6 environmental standards requirements. According to LTFA, for vehicles with an engine power of up to 74 kW and corresponding to the Euro 3 and 4, the tax is reduced with 50%, and for Euro 5 and 6 – with 60%. For buses, trucks, tractors for trailers and fifth wheel coupling tractors with engines corresponding to the Euro 3 and 4 categories, the tax is subject to 40% reduction, and for Euro 5, 6 and EEV – to 50% reduction. In 2014 the range of the exempted electric vehicles has been expanded (amendment to LTFA) – from tax are exempted not only electric cars but also electric motorcycles and mopeds. The electric vehicles falling within the L5e, L6e and L7e (as defined in article 4 of Regulation No 168/2013 of the European parliament and of the Council of 15 January 2013 on the approval and market surveillance of two- or three-wheel vehicles and quadricycles) have been exempted from vehicle tax as of 1 January 2018. With the amendments and supplements of the LTFA adopted in 2018 (effective from 01.01.2019), a new concept for determining the vehicles tax on cars and trucks with maximum technically permissible mass not exceeding 3.5 tonnes has been introduced, namely the tax to be determined by a formula that includes two components: property and environmental. The property component takes into account the power and the year of production of the vehicle, and the environmental component takes into account the environmental category of the vehicle (Euro 1, 2, 3, 4, 5 and 6). Tax exemptions for electric vehicles remain unchanged. With the introduction of this change, the 74 kW threshold has been removed, thus through the ecological coefficient, a reduction of the vehicle tax is granted to all vehicles meeting the requirements of Euro 4 or higher emission standards, without taking into account their power. In this respect the tax deductions for the other categories of motor vehicles have been also amended.
In Bulgaria a product fee has to be paid for any vehicle imported to the country. The fee has to be paid by the owner of the vehicle upon its first registration. Product fee is an option to be achieved compliance with the obligations under the extended producer responsibility scheme in place in Bulgaria. The fee was introduced and regulated by an Ordinance in 2008. The revenues collected from this eco-fee are credited to the environmental fund to the Ministry of Environment and Water – so called Enterprise for Management of Environmental Protection Activities. In 2016 was adopted new Ordinance (in place of the previous one), by which the purchase of electric vehicles is promoted with a 30% reduction of the product fee (compared to the current amount of the new car fee) and for hybrid cars – with 15% reduction (depending on the age, compared to fees for conventional cars). With amendment of the Ordinance from 2018 has been achieved: reducing the product fees for new vehicles; increasing the product fee for motor vehicles aged 5-10 and over 10; reduction of product fee for new hybrid cars; increasing of product fee for hybrid cars aged 5-10 years and over 10 years old. The established financial framework contributes both for promotion of environmental friendly vehicles and for creation of opportunities for development of clean, innovative, competitive and sustainable automotive industry and creation of green jobs.

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