Israel Tax Authority Ministry of Finance

 Setting long term governmental policy  Encouragement of “green” vehicles and fuels  Focus on tax incentives  Sale tax, company car tax, depreciation, income tax  Reducing air pollution from old vehicles  Create tax incentive for the use of renewable energy Working Assumptions

Purchase Tax on Vehicles In Israel and in Select Countries Israel – average tax rate according to import source

P urchase Tax of vehicles (M1 N1) Creating “green index” (from 2/8/2009) –according to pollution level –No focused on a certain type of engine or fuel Incentives for advanced technology - limited period –Hybrid vehicles with low pollution level –Zero-emission cars Tax credits for particulates filters

Calculation of the “green index” value Taxation of Vehicles According to Pollution Level Cost in EURO per ton of emission Type of emission 500CO 900HC 10,000NO x 20,000PM 10 30CO 2

Taxation of Vehicles According to Pollution Level Effective taxDeduction Basic tax rate Green ScoreGroup 10% - (zero emission) % - ((hybrid % 15,000 83% % 13,750 83% % 12,000 83% % 10,500 83% % 9,250 83% % 8,250 83% % 7,250 83% % 6,500 83% % 5,500 83% % 5,000 83% % 4,000 83% % 3,250 83% % 2,000 83% %

Effective Tax Rates by pollution groups

Average “Green index” for vehicles sold in , by period

The relative weight of CO 2 and other pollutants in the green index, by pollution group The weight of CO 2 in the green score AutomaticManualFuel/Transmission 92%91%Gasoline 68%63%Diesel

Hybrid and Zero-Emission Vehicles Zero-EmissionHybridConventionalYear 30%75% Before the reform 10% 30% (group2) 83% with the deduction according to the pollution group 8/ % (group2) % (group2) % 83% with the deduction according to the pollution group % with the deduction according to the pollution group 2020

Taxis, trucks, buses Taxis: 8% purchase tax with deduction scheme identical to private cars –Special importance due to high kilometrage (X5) Heavy vehicles: accelerated depreciation for hybrid trucks and buses

Company car benefit Today company car benefit is computed according to 7 price groups From percentage from new car “price list” (applying to new cars only) Special deduction (500 NIS) for hybrid vehicles  Electric car – still unknown

Company car tax – linear system leverage the “green index” - 1/ % - up to 130K 2.48% - above

Solar power Tax exemption for households producing electricity by photo-voltaic solar panels Accelerated depreciation for businesses using photo-voltaic or solar-thermal technologies

Old Vehicles Reduction of Air Pollution Today No incentive for removing old vehicles off the road Reduced registration fee according to age of vehicle Proposed Granting financial incentive of 550 euro to vehicle owners who deposit their old vehicle (15 years or more)

Fuel Taxation Considering the cost to the economy as a result of the use of various fuels against the level of taxation Proposed: Reducing the tax on “green” and renewable fuels such as biodiesel and ethanol –To obligate dilution of 5% within 3 years. Increasing taxes incrementally on polluting gas such as crude