Did you purchase or do you intend to purchase a hybrid vehicle?
With the recent modification of the 2021 State Budget Law, the great majority of hybrid vehicles will, from now on, be considered, for autonomous taxation purposes subject to the Portuguese Corporation Tax (IRC), as "non-hybrid" or "false hybrid" vehicles. This means, for example, that for a vehicle of this type, with a value of 35.000 €, the autonomous taxation will now go from 17,5% to 27,5% or 35%.
The changes in autonomous taxation rates for hybrid plug-in passenger cars establish that the reduction of the autonomous taxation rates only applies to vehicles which battery can be recharged through a connexion to the electric network and that has a minimum autonomy, in electric mode, of 50 kilometers and official emissions of 50gCO2/km.
In practical terms, if a hybrid plug-in passenger car doesn't meet these requirements in terms of autonomy of the electric motor and of CO2 emissions, said vehicle shall not benefit from the reduced rates established for 2020, as we can see in the following table.
1. Autonomous Taxation (AT).
1.1. What is it?
It is a tax that companies and self-employed businessmen/businesswomen with organized accounts pay for the use of a vehicle within the scope of their activity.
1.2 How is AT calculated?
Autonomous taxation is calculated based on the expenses of the vehicles used within the scope of the activity depending on the type and value of the vehicles. In other words, the expenses with the vehicles are subject to autonomous taxation rates. The calculations are carried out by a certified accountant and included in the income statements.
1.2.1. Which expenses are subject to autonomous taxation?
In a very synthetic way, expenses subject to autonomous taxation are all those costs incurred with vehicles allocated to the activity, such as insurance, expenses with the maintenance and conservation of vehicles, tolls, fuel, depreciation and taxes arising from the use of the vehicle.
1.2.2 Autonomous taxation based on the type of vehicle and acquisition value:
1.3. EXAMPLE: What will the cost of the hybrid vehicle be in 2020 and 2021?
If you acquired a vehicle in 2020 and it doesn't meet the requirements in terms of electric motor autonomy and CO2 emissions, it means it will be subject to the "normal" autonomous taxation rates, without benefitting from the reduced rates.
You will find bellow a table comparing the costs of the same vehicle in 2020 and 2021 with the modifications introduced by the State Budget for
As we can see in the table, if you acquire this vehicle in 2021, the cost will be different and there will be a significant increase.
Due to the changes that will occur in 2021, an increase of the car tax was verified, and due to said car tax increase, it will no longer be possible to deduct the VAT in this hybrid vehicle. The VAT ceases to be deductible because the acquisition value is superior to the limit established for its deduction.
As a result, a vehicle that costed 49.900€ in 2020 will cost 66.051€ in 2021, due to the increase of the car tax value and to the non-deductible VAT.
Beside this change and difference, we also highlight the following: the autonomous taxation rate of this hybrid vehicle goes, in 2020, from 17,5% to 35%.
Let's look at the example, considering only the depreciations for the purpose of calculating the AT. The company must bear, for this vehicle, in 2020, an annual cost of 2.183,13€. On the contrary, in 2021, the same vehicle, since it's considered "non-hybrid", will represent a cost superior to 3.596,34€.
At the end of the 4 years, this car costs an additional 14.385,35€ than in 2020.
In conclusion, for this specific example, this vehicle that used to be a hybrid and that is now considered as a "false hybrid", costs over 30.536,35€ due to the increase of the car tax, the non-deductible VAT and the increase of the autonomous taxation rates.
For those who acquired this type of vehicle in 2020, or intend to acquire it in 2021, we suggest the following: compare the costs with autonomous taxation to the costs with IRS expenses. If you allocate this car to the worker or to members of the decision-making bodies of the company as income in kind, you might make significant savings.
Allocate the vehicle to the worker? Sim, you can do it.
The vehicle is allocated to the workers or members of the decision-making bodies of the company through a written contract. This allocation is considered as an income in kind, which means that it's considered as income for dependent work, and it's therefore subject to IRS.
Thus, allocating this vehicle to the coworker, even if he/she is a decision-making body, of the company, and considering a minimum IRS rate of 48%, you might save up to 15.953,09€ in your company in 2021, because you no longer pay the autonomous taxation in the company and the coworker is subject to IRS.
However, we would also like to draw your attention to the fact that these incomes in kind can be subject to a social security contribution. In this case, it's important to consider the issue of compliance with Article 46-A of the Portuguese Contributory Code.
Lastly, we would like to highlight that the self-employed businessmen/businesswomen with organized accounts still benefit from the reduction of autonomous taxation rates for this type of vehicle, since there was no alteration subject to IRS.
If you wish, you can make a simulation of your situation in our Car Taxation simulator.