A guide to the 2027 car market: taxes, benefits, and prices

The Tax Authority, the Ministry of Transport, and the Ministry of Environmental Protection recently published the formula that will determine the purchase tax rate for new vehicles. At a time when Chinese car manufacturers are increasingly capturing the institutional market and electric vehicle sales are showing signs of weakening, these moves offer a glimpse into the future of the Israeli automotive market.

Value of use for company cars: no changes expected soon

Company car users pay a "value of use" (shvi shimush) equal to 2.48% of the vehicle's value, which is added to gross salary for tax purposes. "Green" vehicles receive monthly benefits: approximately 550 NIS for hybrids, 1,200 NIS for plug-in hybrids (PHEV), and 1,300 NIS for electric vehicles. The Tax Authority acknowledges that the current scheme is flawed, as it fails to account for actual electric-only driving or varying ranges. However, the current framework is locked until the end of 2028, though provisions exist to update guidelines based on market and technological developments.

Electric vehicle purchase tax: slight increase likely

The purchase tax for electric vehicles remains a subject of debate. In 2025, the tax was 45%, with subsequent plans to raise it to 52%, though the Knesset Finance Committee eventually set it at 48% with a 22,000 NIS benefit ceiling. While a failure to set a new tax could theoretically trigger an 83% rate, experts consider this unlikely. Sources close to the Ministry of Finance suggest a return to the 52% rate. Price hikes are not expected, as weak demand and sales promotions are likely to neutralize the impact.

Green tax formula: competition prevails

The Ministry of Transport has provided importers with a calculation formula: 83% purchase tax for standard vehicles and 48% for electric ones. Initial plans to include tire and brake emissions were shelved because importers currently lack the necessary data. The upcoming January update will be a revision of the existing formula. While hybrids may receive fewer tax credits, plug-in hybrids will remain largely unaffected. Massive price increases are not anticipated, as the market typically adapts through exchange rates and inventory management.

Mileage tax: unlikely to be implemented soon

Rumors regarding a mileage tax for electric and plug-in hybrid owners starting next January are unfounded. Implementing such a tax requires Knesset approval, which is uncertain given the current political climate. Furthermore, there are significant practical challenges: the state would need to track mileage, which is currently impossible without access to vehicle computers or a complex reporting system. Given that the UK is taking 18 months to prepare for similar infrastructure, the chances of Israel organizing the necessary logistics in less than a year are virtually zero.