The proposed state budget includes a new tax on luxury cars among the measures which will apply to the motor vehicles sector. The tax will apply to all cars with a retail price of over NIS 300,000, but belying expectations, the tax will not apply to the importer's price, but to the consumer's price.
The result is double taxation, which applies to a car's gross price, including the full purchase tax, VAT, customs, and the importer's margin. The new tax will boost the prices of luxury by tens of thousands to hundreds of thousands of shekels. It is not yet clear how the tax will be calculated for personally imported cars.
The proposed VAT hike will also raise the price of cars. The pending green taxation update is not included in the budget, but the Israel Tax Authority says that this is an administrative procedure, which does not have to be included in the budget. It adds that it is moving ahead on the measure. The green taxation update will mostly raise prices for cheaper and energy efficient cars.
The budget includes two measures on leasing companies. The first is the cancellation of a rule which allows the companies to offset capital gains on car sales. Under the current rule, these sales are classified as used equipment, the sales of which companies reported capital gains, which were used to buy new cars and defer the tax payment on them. Some leasing companies have deferred tens to hundreds of millions of shekels in taxes under this rule.
The second measure will lower the amortization rate on leasing companies' cars from 20% to 15%, which will increase the companies' tax liability. The leasing companies will reportedly continue their legal challenge of the amendments, and if they fail, they could raise the prices of leased cars.
The budget also proposes extending the use of company cars in the government fleet from four years to five, including cars used by the Ministry of Defense.
Published by Globes [online], Israel business news - www.globes-online.com - on May 7, 2013
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