Norway drives change to VAT on electric cars

Are you gearing up for a smooth ride in 2023? First, double-check that you're up to date with the newest changes regarding VAT on electric vehicles (EV) in Norway. Recent changes to VAT on EVs include a threshold increase that determines whether an EV is zero-rated or VAT liable. 

Fortunately, you don't have to steer too far off-course; in this article, we focus on the most significant changes, challenges and impact of the 2023 VAT rates on EVs. Here's what you need to know regarding Norwegian VAT on electric vehicles for the year ahead. 

Changes for VAT on electric cars for 2023

No time to idle; the recent changes in Norway's value-added tax (VAT) law have been in effect starting 1 January 2023. These changes were approved and sanctioned on 20 December 2022 by Norway's King in Council. 

VAT on electric vehicles has been under significant reform, as these changes follow the VAT subsidies on electric vehicles, which were introduced in 2022. 

So, what are the most significant current changes, and how do they affect business operations? 

Let's start the engines! 

The new threshold for purchasing electric vehicles

In the past, all sales of electric cars in Norway were VAT-exempt. However, vehicles registered from 2023 onwards will be limited to a new threshold. VAT exemption will now only apply if the sale is under NOK 500,000. If your purchase is beneath the new threshold, you will be subject to a zero VAT rate for the entire purchase price.

However, for purchases that exceed the threshold amount, the excess amount will be VAT liable at the standard VAT rate of 25%. This implies that although you may have purchased your electric vehicle before the new threshold changes, if it still needs to be delivered by 1 January 2023, your purchase will be subject to VAT on the amount exceeding NOK 500,000.

Changes to the leasing of electric vehicles

The new amendment has left some rightful concern and confusion about how it affects electric vehicle leasing. However, leasing companies should note that this partial VAT will also apply to leasing electric vehicles delivered to customers. 

Starting in 2023, if an electric car is leased to customers with a cost price of more than NOK 500 000, it is VAT liable on the excess cost. The VAT on leasing electric cars will be calculated as the basis of rent x excess cost price ÷ total cost price. However, authorities have yet to clarify how this new VAT particularly applies to already established EV leases that have a lease duration beyond 2022. Another tricky element of the new VAT threshold is how suppliers set up their ERP systems and VAT coding. This is due to the fact that the same supply could be subject to both a VAT rate of 25% and a VAT rate of 0%. Further complicating the process is the fact that the Norwegian Bookkeeping Regulation requires you to specify sales with different VAT rates separately.

As the new changes take effect, we expect further announcements on the practicality and legality of the new threshold for EV leasing. In the meantime, we're here to guide you through the process. 

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