Tax regulation mechanism (Vehicle registration tax)

Law on registration of vehicles

When registering cars in Denmark a tax is levied that consists of two main components: the value of the car and the CO2 emissions of the car. Due to the second component, the registration tax for EVs and hybrid vehicles is lower than for combustion fuelled cars.
A transitional mechanism in the law to further support the purchase of EVs is an additional tax credit that is applied to cars with a battery. This transitional mechanism will be phased out by 2025.

• A base deduction is applied to zero emissions vehicles amounting to 170,000 DKK (22,862 EUR) (and 50,000 DKK (6,724 EUR) for low-emissions vehicles).
• An additional tax credit is applied to cars with batteries (max 45 kWh). In 2021 this was 1,700 DKK per kWh; in 2022 it will be 1,300 DKK, in 2023 900 DKK, in 2024 500 DKK; and in 2025 the scheme will have been phased out.

Consumers and corporate purchasers of cars.

The tax (and eventual deductions) is automatically applied when registering a new vehicle in Denmark. (§1 Law on registration of vehicles)
First a tax is levied on the value of the car in three brackets (similar to how income tax is structured): the first bracket is applied to the value of the car up to 65,000 DKK (8,742 EUR) where a tax rate of 25% is applied; the second bracket is from 65,000 to 202,200 DKK (8,742 to 27,190 EUR) with a rate of 85% and the third bracket is applied to whatever value of the car’s price is above 202,200 DKK with a tax rate of 150%. (§4 Law on registration of vehicles)
Then, similarly to the structure above, a carbon tax per gram CO2 is levied on the car’s CO2 emissions per km. In the first bracket, which includes emissions up to 125g/km, a tax of 250 DKK (34 EUR) is applied, in the second bracket, emissions of 125-160g/km are charged with 500 DKK (67 EUR) per gram emitted, and in the third bracket for emissions of more than 160g/km a tax of 950 DKK (128 EUR) per gram is applied. (§4(2) Law on registration of vehicles)
Next, a base tax deduction is applied to zero emissions vehicles amounting to 170,000 DKK (22,862 EUR) (and 50,000 DKK (6,724 EUR) for low-emissions vehicles). This base deduction will be lowered by 2030 to 137,000 DKK (18,423 EUR). (§5b(3) Law on registration of vehicles)
Finally, an additional deduction is applied to zero-emissions cars. In 2021 this was 1,700 DKK per kWh; in 2022 it will be 1,300 DKK, in 2023 900 DKK, in 2024 500 DKK; and in 2025 the scheme will have been phased out. (§5b(5) Law on registration of vehicles)

DMT