Kfz Tax Exemption for Electric Vehicles Extended Until 2035

The German government has announced the extension of the vehicle tax exemption for electric vehicles (EVs) until 2035. This decision, made by the Federal Minister of Finance, aims to encourage the adoption of electric cars in the coming years by maintaining incentives for potential buyers.

Currently, the tax exemption for newly registered pure electric vehicles is set to expire on January 1, 2026. However, the proposed legislation will extend this exemption for an additional five years. Under the new regulations, electric vehicles first registered by December 31, 2030, will continue to benefit from a maximum ten-year tax exemption until the end of 2035. This initiative is designed to promote the early purchase of electric vehicles, as emphasized by the finance ministry.

The amendment to the Motor Vehicle Tax Act is expected to result in significant tax revenue losses for the federal government, amounting to several hundred million euros over the next few years.

As part of a broader strategy, the finance minister highlighted that this tax exemption is just one element of a comprehensive package being discussed at the upcoming 'automobile summit' convened by Chancellor Friedrich Merz. The summit will gather federal ministers, state representatives, automotive industry stakeholders, and trade union representatives to address the challenges facing the automotive sector.

The automotive industry is currently experiencing a downturn, grappling with declining sales, competition from China, and the shift towards electric mobility. Additionally, ongoing trade disputes with the United States have led many companies to implement cost-cutting measures and workforce reductions.

Hildegard Müller, the president of the German Association of the Automotive Industry, has called for quick action to ensure the extension of the tax exemption, as originally agreed in the coalition agreement. She emphasized that the tax exemption has proven effective as a purchasing incentive for electric vehicles and that its expiration for new registrations after January 1, 2026, would significantly hinder the growth of electric mobility for both passenger cars and commercial vehicles.

In addition to discussing the tax exemption, the summit may lead to further measures aimed at supporting households with limited and moderate incomes in transitioning to environmentally friendly mobility solutions. A 'social leasing program,' similar to one in place in France, has been mentioned as a potential initiative to provide state subsidies for leasing electric vehicles.