The end of the EV paradise? Norway’s 25% VAT exemption for electric vehicles has been in place for over 20 years, making it one of the earliest and longest-running EV incentives in the world, but now it’s thinking about scrapping it from 2027.
Alongside, the government proposes increasing the registration tax on fossil fuel (ICE) vehicles, to maintain incentives favoring EVs. Why? The Norwegian government argues that the transition is largely successful, as EVs have a 98.3% share of all new car sales, and that continuing subsidies at the current scale are no longer necessary.
And it can use the 17.5 billion kroner in revenue it misses this way. After all, over the whole 2001–2027 period, the cumulative ‘cost’ of all EV incentives (VAT + registration tax + toll/fee exemptions, etc.) is much higher, well over NOK 100 billion (€8.6 billion) in total.
Small cost compared to oil revenue
However, the EV VAT exemption ‘cost’ is relatively small compared with what the state earns as Western Europe’s largest oil producer, and providing 30% of all EU gas imports. The state’s net cash flow from petroleum activities (i.e., taxes, fees, and state direct ownership returns) is projected to be NOK 698 billion (€59.4 billion) in 2025.
Norway currently exempts battery-electric passenger vehicles (BEVs) from the 25% VAT on the portion of the purchase price up to a threshold of NOK 500,000 (€42,500) as of now. In the budget the government is proposing now, the threshold for tax-free purchases would be lowered to 300,000 Norwegian kroner (€25,680) in 2026 and scrapped entirely in 2027.
A Taycan for €16,000 cheaper
For example, someone wanting to buy a Porsche Taycan today with a base price excluding VAT of NOK 950,000 (approximately €81,300) pays NOK 112,000 in VAT on the part above the threshold, totaling NOK 1,062,000 (approximately €90,935). To compare, in Belgium, the Taycan would cost you today €106,900 (21% VAT included).
The same car in 2026 would be taxed at NOK 162.500 (€13,910), costing 1,112,500 kroner (€95,200) and 1,187,500 kroner (€101,600). So, compared to today’s system, a Taycan buyer in 2027 would pay approximately €10,700 more in VAT alone than in 2025.
For a more ‘moderate’ EV choice, like the Tesla Model Y Long Range (NOK 550,000 base price or €47,080), you only have to pay about €1,000 VAT today, rising to €5,400 in 2026 and €11,800 in 2027. And it can make a substantial difference in choosing an EV over an ICE, with a VW Golf 1.4 TSI listed at 321,439 kroner and the ID.3 base model at 304,900.
Needing parliamentary approval
However, scrapping the VAT exemption is not yet a reality. The proposal still needs parliamentary approval. Norway’s government is a minority government, so it must negotiate with other parties to carry through this change.
And it remains to be clarified how the rules will treat EVs ordered before 2027 but delivered afterward, leases, used EVs imported, and other edge cases. The exact legal details and the scope of application will depend on the final legislation, amendments, and negotiated compromises in parliament.
Critics argue the phase-out is too abrupt and should be more gradual. Some opposition voices warn that a fast removal of incentives could shock the market, slow EV adoption, and push buyers back toward fossil cars.
The Norwegian EV Association calls the proposal ‘hasty’ and argues for a phased-out approach. Some say that the complete VAT removal should be delayed until the EV market is more mature across all segments, not just premium models.
And the opposition questions whether the government’s proposed higher taxes on internal combustion-engine (ICE) vehicles will be sufficient to maintain a meaningful incentive differential. If ICE taxes don’t increase enough, the advantage for EVs may erode too much.
More benefits than VAT exemption alone
However, EVs still benefit more in Norway than from the VAT exemption alone. EVs pay lower or no annual road tax (though this is being phased out) and are often exempt from emissions or weight-based surcharges.
BEVs get favorable treatment in company car taxation. Additionally, businesses transitioning to electric vans may be eligible for subsidies that cover part of the additional cost.
EVs pay reduced tolls, usually capped at a maximum of 70% of the full toll, or are exempt from particular bridge and ferry fees. And EVs often have preferential (reduced or free) parking in municipal zones, although many municipalities have scaled back those perks.
Because EVs are now dominant in the new-car market in Norway, many of the incentives are under pressure or have already been trimmed down, and future plans are being debated. To be continued, without doubt.
