Only nine EU countries truly encourage companies to switch to electric vehicles

Companies register around 60% of all new cars in the European Union, which makes corporate fleets one of the key drivers of transport electrification. However, new research by the organisation Transport & Environment shows that most EU member states still do not have tax systems that sufficiently encourage companies to opt for electric vehicles.

The analysis examined how much tax companies pay for company cars over a typical four-year period of use. This amount was then compared to the difference in purchase price between an electric and a petrol car of the same class. According to data from the consultancy Autovista, a compact electric car costs on average €10,650 more than a comparable petrol-powered model. The aim of the analysis was to show whether the tax incentives offered by states can offset this initial price difference and thus make electric vehicles a more financially attractive choice.

The results show that only nine out of 27 EU member states have tax systems that clearly encourage companies to switch to electric vehicles. Among the most successful countries are France, the Netherlands, Belgium and Denmark, as well as Portugal, Slovenia and Greece, showing that strong fiscal incentives are not necessarily linked to the size of the economy or the level of national income, but rather to how tax policy is designed.

In these countries, the tax system significantly reduces the financial gap between electric vehicles and those with internal combustion engines, sending a clear signal to companies to invest in zero-emission vehicles. At the same time, these very countries also record high rates of corporate fleet electrification.

On the other hand, as many as 18 member states do not have sufficiently strong tax mechanisms to encourage the transition to electric vehicles, while 12 of them offer no tax incentives at all for companies wanting to electrify their fleets. This group includes some of Europe’s largest car markets, including Germany, Spain, Italy and Poland.

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The consequences of such policies are significant. According to the analysis, as much as 68% of all compact company car registrations in the EU take place in countries that do not provide clear tax incentives for purchasing electric vehicles, while nearly half of registrations – 49% – occur in countries that offer no tax breaks whatsoever for fleet electrification.

The research also points to another problem: in many countries, tax systems still favour petrol vehicles. This primarily relates to various tax deductions, VAT refunds and favourable depreciation models that reduce the costs of owning fossil-fuel vehicles, instead of encouraging a shift to cleaner alternatives.

Some countries that are among European leaders in the share of electric company cars, such as the Netherlands, Finland, Sweden and Austria, have been gradually reducing tax breaks for electric cars in recent years, which has led to a narrowing of the tax gap between electric and conventional vehicles. However, the Netherlands is already preparing new measures. As of January 2027, employers will pay an additional tax on petrol and diesel company cars that are available to employees for private use or daily commuting.

According to the assessment of Transport & Environment, tax policy remains one of the most important instruments for accelerating the electrification of corporate fleets and achieving the European Union’s climate goals. Without clear fiscal signals to companies, the transition to electric vehicles could proceed much more slowly than is needed to reduce emissions from the transport sector.

Energy portal