Published for public notes: Purchase tax on electric vehicles will be 52% in 2026; reduction in operating value for vehicles with advanced propulsion will remain unchanged

The Tax Authority has published for public comment a team to determine the reduced purchase tax rate for electric vehicles, the luxury tax on vehicles with a consumer price higher than 300,000 NIS, and the reduction in the use value for hybrid and plug-in electric vehicles provided to employees by the workplace.

According to the published orders, the purchase tax rate on electric vehicles will be 52% in 2026 up to a benefit ceiling of 30,000 NIS, compared to 45% up to a benefit ceiling of 35,000 NIS in 2025. The outline that was in effect in 2025 will be effective, vehicle green rating tax reductions for vehicles by vehicle will be reduced by a regularization of 750 NIS, and tax additions for the green rating of electric vehicles will be expanded by a permanent installation of 750 NIS.

It is also proposed in the orders that the luxury tax that currently applies to vehicles with a consumer price higher than 300,000 NIS, which will be effective on January 1, 2026, will become a permanent tax.

In addition, it is proposed to extend the validity of the reduction amounts in the operating value of electric, hybrid and plug-in style vehicles. In accordance with the Income Tax Ordinance, tax must be imputed for the value of work in a car provided to the workplace. The value of work line is based on 2.48% of the price of a new vehicle (for vehicles registered for traffic after January 1, 2010).

For owners of advanced propulsion vehicles, depreciation rates for the value of use have been established, of which vehicles are more expensive than regular vehicles but more economical in current use, the normal imputation rate produces a result that does not correctly reflect the economic costs of operating these private vehicles.

In 2022, the depreciation amounts were updated by temporary order until the end of 2025. The aforementioned amounts are updated each year in accordance with the increase in the index, and in 2025 their amount is 560 NIS for a hybrid vehicle, 1,130 NIS for a plug-in vehicle and 1,350 NIS for an electric vehicle. Now it is possible to extend the validity of these amounts until the end of 2028. The cost of the state’s progress is estimated at approximately 260 million NIS per year, and the order indicates that there are still balancing actions provided for the extension of the validity of the amounts.