The tax reform largely relates to changes in purchase taxes imposed on new motor vehicles weighing less than 3.5 tons. For the first time, tax rates on vehicles will be linked to the level of pollution emitted by these vehicles. Relatively clean vehicles will enjoy a significant tax benefit and lower sales prices while polluting vehicles will cost more in the wake of the reform.

The tax group of each vehicle model is based on the following:

1. Air pollution testing of each car model before it is approved for use in Israel, or in Europe or in the USA. The test results provide information on the following pollutant emissions: carbon monoxide (CO), hydrocarbons (HC), nitrogen oxide (NOx), particulates (PM) and carbon dioxide (CO2).
2. Factoring of the emission data of each model by means of a "green grade." The grades are divided into 15 groups of pollution that form the basis for tax credits, with group 1 representing the cleanest vehicle group and group 15 the most polluting.
3. Setting the tax benefit for each group according to its pollution level. The tax benefit is granted after uniform taxing of all vehicles at a rate of 90% (except hybrid cars and electric cars). The rate of benefit ranges from 15,000 shekels for relatively clean vehicles to 0 shekels for the most polluting group.

The new tax structure will make cleaner and smaller cars less expensive by thousands of shekels, while the cost of polluting cars will increase significantly in order to incentivize the public to purchase more environment friendly cars. Taxes will go down for most of the small family cars (up to 120,000 shekels) and it is therefore expected that the green tax will reduce the price to the consumer for these cars.

The Ministry of Environmental Protection has published regulations which require car or motorcycle advertisements to include data on the pollution level of the car by means of a color scale and to provide data on the fuel consumption of the vehicle. In addition, the pollution level will also appear in the car registration. The objective of these regulations is to increase public awareness of the subject in order to allow consumers to choose the most appropriate car for them.

Other changes in the car tax reform include:

1. Switch to a linear method of calculating the value of use of a company car. The value of use of a company car is now calculated based on its book value, rather than according to value of usage groups that were previously used. Vehicle importers are expected to reduce the list prices of their cars in order to reduce its value of use and increase sales.
2. Grant of tax benefits for the import of a diesel vehicle which is equipped with a particulate trap at a rate of 1,500 shekels to 4,000 shekels, depending on the type of converter.

Specific information in Hebrew, including a detailed list of car models and their pollution group, is available on the Tax Authority  and Ministry of Finance websites while information on the method of determining the level of pollution is available on the Hebrew websites of the Ministry of Environmental Protection and the Ministry of Transport  

More Links:

	Advertising Requirements on Fuel Consumption and Air Pollution Emissions
	Vehicular Air Pollution
	National Plan for the Reduction of Vehicular Pollution