ESA greenlights prolongation of Norwegian tax incentives for electric cars

The EFTA Surveillance Authority (ESA) has today approved a prolongation of tax incentives for battery electric passenger vehicles in Norway for two more years.

The objective of the measure is to encourage consumers to purchase battery electric passenger vehicles instead of fossil fuel-based alternatives, and as such, stimulate the use of more environmentally friendly vehicles in Norway.

Although the share of battery electric passenger vehicles has increased over the past years, their share of the total passenger car population is still significantly lower compared to conventional fossil fuel passenger cars. The reduced value added tax (VAT) rate on battery electric passenger vehicles is likely to improve the competitiveness of these vehicles, which is required to reduce carbon emissions from the transport sector. ESA therefore considers the measure to comply with EEA State aid rules.

The aid scheme was first approved by ESA in 2015, and later prolonged and amended in 2017, 2020 and 2022. The current scheme from 2022 expires on 31 December 2024. Today, ESA has approved a prolongation of the scheme approved in 2022 for two more years, from 1 January 2025 to 31 December 2026.

The scheme comprises two support instruments. The first instrument is the zero VAT rate on supply and import of battery electric passenger vehicles, up to the threshold of NOK 500 000. The second instrument concerns the zero VAT rate for leasing such vehicles, with the additional rules which reflect the threshold of NOK 500 000.

ESA's decision can be read here.

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