Dáil Éireann Debate, Wednesday - 4 May 2022
146. Deputy Catherine Murphy asked the Minister for Finance if he will clarify the way in which VRT is calculated in respect of imported second-hand electric vehicles and hybrid vehicles from the UK and from the EU. [22016/22]
View answer147. Deputy Catherine Murphy asked the Minister for Finance if he has plans to review from a revenue perspective the barriers that exist in respect of the importation of second-hand electric vehicles and hybrid vehicles in order to enhance the availability and choices of stock for end users. [22017/22]
View answerI propose to take Questions Nos. 146 and 147 together.
All vehicles in the State must be registered, and Vehicle Registration Tax (VRT) generally becomes payable when a vehicle is first registered here. Typically, this occurs when a new vehicle is sold in the State, or when a vehicle is imported.
I am informed by Revenue that the VRT calculation on passenger vehicles is based on the Open Market Selling Price (OMSP) of the vehicle and its emissions levels, and the method of calculating VRT is the same, regardless of whether the passenger vehicle is new or has been imported second-hand, whether that be from another EU Member State or from a third country such as the UK.
In the case of a second-hand imported passenger vehicle, the OMSP is defined in law as the price, inclusive of all taxes and duties, for which, in the opinion of the Commissioners, the vehicle might reasonably be expected to sell in an arm’s length sale in the State by a retailer.
The amount of VRT on a passenger vehicle has two components, based on the vehicle’s carbon dioxide (CO2), and nitrogen oxides (NOx) emission levels. The CO2 component of the VRT charge is a percentage of the vehicle’s OMSP, ranging from 7% for a vehicle from zero CO2 emissions, up to 41% of the OMSP for vehicles with the highest emission levels. The NOx component of VRT is calculated using a progressive scale, starting from €5 up to €25 per mg/km of the vehicle’s NOx emissions level. As a result of these calculations, the total VRT charge for ultra-low emission vehicles (e.g. fully electric cars, also known as EVs or battery EVs) is therefore low, and the total VRT grows higher according to the emissions output of the vehicle involved and its market value. As a consequence, the VRT on electric and on hybrid passenger vehicles is generally substantially lower than on their petrol or diesel equivalents, due to having lower emissions.
The Deputy will also be aware that, until the end of 2023, electric vehicles can avail of relief on VRT. Battery electric vehicles with an OMSP of below €40,000 are entitled to a VRT reduction of up to €5,000, which has the effect of reducing their VRT to zero. A tapered relief applies for battery electric vehicles with an OMSP of between €40,000 and €50,000. There is no relief for higher value vehicles.
The law governing VRT remains under regular review, and recent revisions include the introduction of the NOx charge since 2020, and the increase in the CO2 charges this year, both of which significantly incentivise the uptake of lower-emitting vehicles. Reviews of the VRT system will continue as part of future Finance Bills, in line with the Government's Climate Action Plan, which incentivises the decarbonisation of the transport sector.
Finally, apart from the VRT arrangements, the Deputy will wish to note that, in accordance with EU law, vehicles imported from third countries are generally also subject to customs duties and VAT. Also, a new means of transport (i.e. a vehicle that is 6 months old or less, or has travelled 6,000kms or less) is subject to VAT when brought into the State from another part of the EU. Revenue informs me that VAT rules in relation to importations are established and agreed at EU level. There is extremely limited scope for adjustments to these regulations at a national level, and as a consequence, VAT will continue to apply to non-EU imports and intra-EU new means of transport, including hybrids and battery electric vehicles.
Revenue’s website provides information for individuals who plan to import a vehicle and guidance for them on the tax arrangements that apply.
