The New Danish Vehicle Taxes Are Still Crazy Complicated
Published on January 5th, 2021 | by Jesper Berggreen
January 5th, 2021 by Jesper Berggreen
When I wrote about the new Danish vehicle tax scheme finally going into law, I was a bit easy on the details, just listing some new prices. There’s a reason for that. Read on if you don’t mind wasting a few minutes. You probably won’t believe it can be this complicated anyway.
In the Danish auto import business, the term “steel price” is used as the price the dealer actually pays for the vehicle when it is imported and placed in stock. The steel price is typically the base invoice price of the vehicle from the manufacturer added import customs (10% for vehicles manufactured outside the EU) and VAT (25%). Same applies if you import a vehicle directly yourself.
Danish EV Tax Is (Still) Complicated
Now, wouldn’t it be cool if the dealer (or manufacturer in the case of Tesla) just put a say, 9% profit on this price and there you go, steel price is now converted to sticker price! Not so fast. Before you can drive off in your new electric vehicle, there is the basic registration taxes that apply to all vehicles, and then some extra calculations. Among many others, am.dk and autobranchendanmark.dk had the calculation formulas ready before the law was agreed to go into effect from December 18th, 2020 (See also Original brief from the ministry of finance and fact sheets from the Danish Ministry of Taxation December 4th, 2020):
- An electrified vehicle (including PHEV) is eligible for a tax deduction of DKK 1,700 ($276) per kWh of battery capacity up to the first 45 kWh.
- The tax is then calculated on the basis of 2 scale breaks on the resulting value. The initial value up to DKK 65,000 ($10,587) is taxed at 25%.
- First scale break: The value from DKK 65,000 ($10,587) to DKK 202,200 ($32,938) is taxed at 85%.
- Second scale break: The value above DKK 202,200 ($32,938) is taxed at 150%.
- Electric cars do not emit CO2 when driving, therefore there is no CO2 emission tax (but this makes ICE vehicles more expensive from now on).
- A basic deduction of DKK 21,700 ($3,534) is subtracted from the tax now calculated.
- For pure electric vehicles, there is an additional basic deduction of DKK 170,000 ($27,689).
- Of the resulting tax now calculated, the final tax to be paid is 40% for BEV (in 2030 this will rise to 80%).
Let’s try to calculate the price of a Tesla Model 3 SR+. The price $36,490 as found on Tesla USA website + shipping approx. $2,000 + customs 10% ($3,649) + VAT 25% ($9,123) = $51,262. Being a vehicle from Tesla with direct sales, the profit is already included (talk about competitive advantage). However, the price up until now for the Model 3 SR+ in Denmark has been DKK 373,000 ($60,835) including delivery fees but 100% exempt from taxes. So, there must be a lot more costs hiding in the total logistics and/or more profits to Tesla (realistically Tesla is around 20% profits before any credits).
Anyway, let’s look at the calculations in the same sequence as above with a $60,184 base price (excluding delivery fees), and we shall see where we end up:
- Taxable base value after battery capacity deduction: $60,184 – (45 x $276) = $47,764
- Base tax: 0.25 x $10,587 = $2,647
- Tax first scale break: 0.85 x ($32,938 – $10,587) = $18,998
- Tax second scale break: 1.5 x ($47,764 – $32,938) = $14,826
- Co2 emission tax: $0
- Basic tax deduction: – $3,534
- BEV deduction: – $27,689
- Final tax: 0.40 x ($2,647 + $18,998 + $14,826 – $3,534 – $27,689) = $2,099
Resulting vehicle price is $60,184 + $2,099 = $62,283. Now, on Tesla’s website as of December 10th (when I started writing this article), the price of a Model 3 SR+ delivered in 2021 is stated: $69,254 (before delivery fees) of which Tesla states $7,388 is tax (Vehicles on stock ready for delivery before the new law was on offer at prices as low as $58,516 before the new year).
So why this difference of about $7,000 between Tesla’s sticker price and my calculations? Well, I had to call some number crunching pro to figure this out: Jacob Skjærris, Senior Automotive Manager at KPMG ACOR TAX, who was recently interviewed by the Danish EV Owners Association (FDEL) on the subject, told me this difference in price could be for the fact that all parts of the new law are not due to be in effect until June 2021, but the new prices can be used from December 18th, 2020. The old law is therefore still in effect and that means from January 1st, 2021 a current deduction of DKK 40.000 ($6,575) disappears and electric vehicle only tax rise from 20% to 65%. So either the dealer puts this actual refundable price difference in effect for 6 months on itself or the customer. For now it seems Tesla has done the latter.
Fast forward to December 18th and I checked that price again:
OK, no change, but there is still a bunch of 2020 models on stock on offer for the old price. But that means if you go and order a 2021 Model 3 SR+ today (for delivery in February, 2021), you pay $69,254 and when the real price in June hits $62,283 you can claim a refund from the Danish Ministry of Taxation. Tesla could choose to change this practice any day between now and June, but they are not obliged to do so. Will it affect their sales? Probably. Oh, and if you choose to buy one of the stock 2020 models, you cannot get a refund in June! Even though this price is a bit higher than the final 2021 model price, because it’s registered under the old tax scheme. When all is said and done, The Model 3 SR+ will be cheaper next year, which is very nice.
Fast forward to January 5th, 2021. Has the price changed on Tesla’s website? No. Still around $70,000 for the cheapest Model 3. But the same day I got a nice email from Tesla, which I asked politely back in December what was going on, and what I should tell my friends and family when they asked me about these strange prices in the hope they might get a good deal with the new registration taxes (hopefully around $60,000 for the cheapest one). A very kind and diligent Tesla Advisor Mikkel Ledet Larsen tried to clear thing up for me:
This is because our prices reflect the registration tax based on current legislation. Only when the bill has been processed will our website be updated. The first [parliament] hearing is on January 14th, 2021, and we expect it to be completed sometime in February. Then SKAT’s [Danish Ministry of Taxation] IT systems must be updated and then our prices are updated.
You can follow the process on the parliament’s website here: https://www.ft.dk/samling/20201/lovslur/l129/index.htm
For our model 3, you can typically see the registration tax on the last page of the configurator to calculate a more realistic price, this is because you do not pay tax [according to the new law] if the car is under DKK 500,000 ($82,438). However, our model 3 performance can get a price higher than this by adding options to the car, which in this case you pay registration tax (40% of the original registration tax).
The same applies to our models S and X. However, the registration tax is still 40% above DKK 500,000, which is why it is a little difficult to calculate. (Feel free to write to me if you have thoughts about one particular model and options and I will calculate an estimate).
Confused? Still wondering why I often do not bother writing to many details about this? When I bought my own Model 3 in 2019 I paid $500 too much in taxes, which The Danish Motorist Association (FDM) helped me calculate. It took me 6 months to get the refund. I don’t blame Tesla, I mean, who can make these calculations correctly anyway? The law in effect at the time, compared to the new law we have been struggling to understand in this article, was not simpler.
Allegedly there has been scandals involving dealers fiddling with the registration tax calculations on trade-in vehicles to make it look as if customers get a nice rebate on buying a new vehicle, because it is virtually impossible to check these calculations due to the steel price (and laws) changing all the time. On top of that, it is known that vehicle manufacturers have granted Danish dealers rebates because the final price would otherwise be too high for it to make any sense in the market. To my knowledge, Tesla does not make those kind of specific country deals (well, obviously, because there are no dealers), making pricing comparisons between brands virtually impossible.
However, of all the example calculations on the new law that I have have seen overall in the media, it looks as if EVs generally will be cheaper in the lower end (up to $60,000 – $80,000), and ICE vehicles will be more expensive. On top of that, carbon polluting fuels will be increasingly expensive both due to lower demand and higher taxes, but as I have said before, all this may not matter much. EVs have the price potential to knock the bottom out of the whole vehicle market when batteries get cheap enough. It is only a matter of how long the agonizing change will take. 5 years? 10? 20? It’s anybody’s guess. Nonetheless, the ICE age is coming to an end, but that’s hardly news anymore.
Danish EV Market Is Ripe
By the way. When can you get your new EV in Denmark? The Association of Danish EV owners (FDEL) called up all the dealers and got these approximate delivery times:
Audi e-tron: 2 months.
BMW i3: 3 months.
DS3 Crossback E-tense: 2 weeks to 3 months.
Fiat 500: December 2020.
Ford Mustang Mach E: Q1 2021.
Honda e: 2 months.
Jaguar I-PACE: In stock .
Kia e-Niro 39/64 kWh: In stock or up to 5 months.
Kia e-Soul 39/64 kWh: In stock or up to 5 months.
Hyundai Kona 39/64 kWh: In stock.
Hyundai IONIQ 39 kWh: In stock.
Maxus Euniq: In stock.
Mazda MX-30: In stock.
Mercedes EQA: Q1 2021.
Mercedes EQC: 3 months.
Mercedes EQS: Preorders open 2021.
Mercedes EQV: 3 months.
MG ZS: In stock.
Mini Cooper SE: 3 months.
Nissan Ariya: Autumn 2021.
Nissan LEAF 40 kWh: In stock.
Nissan LEAF e+/62 kWh: 2 months.
Opel e-Corsa: Q1 2021.
Opel Mokka e: Q1 2021.
Peugeot e-208: December 2020.
Peugeot e-2008: In stock.
Porsche Taycan: 3 months.
Renault ZOE 52 kWh, CCS: In stock or up to 3 months.
Skoda Enyaq: Q2 2021.
Tesla Model Y: Q4 2021.
Tesla Model 3: In stock or up to 3 months.
Tesla Model S: In stock or up to 4 months.
Tesla Model X: In stock or up to 4 months.
Volvo XC40 Recharge: Q4 2021.
VW ID.3: In stock or up to 3 months.
If you choose to buy a Tesla, feel free to use my referral link to get lots of free miles: https://ts.la/jesper18367
Have a tip for CleanTechnica, want to advertise, or want to suggest a guest for our CleanTech Talk podcast? Contact us here.
Selling Teslas in 2012 vs. 2021