Vehicle Registration Tax (VRT) is an excise duty which is imposed, under Irish law, on the registration of a vehicle in the State. Finance Act, 1992 (as amended) sets out the legislative framework for vehicle registration and the charging and collection of VRT. Under this legislation, the method of calculating VRT is the same regardless of whether the vehicle is new or has been imported second-hand from another EU Member State or a third country.
In accordance with subparagraphs 132(3)(a)(i) and 132(3)(a)(ii) of the Act in particular, VRT on category A vehicles (generally passenger cars) is assessed based on the value of the vehicle and its emissions levels for carbon dioxide (CO2) and nitrogen oxide (NOx). The CO2 component of the VRT charge is a percentage of the vehicle’s Open Market Selling Price (OMSP), ranging from 7% for a vehicle with zero CO2 emissions, up to 41% of the OMSP for vehicles with the highest emission levels. The NOx component of VRT is measured in accordance with Regulation (EC) No 715/2007 of the European Parliament and of the Council of 20 June 2007 and its implementing regulations and is calculated using a progressive scale, starting from €5 up to €25 per mg/km of the vehicle’s NOx emissions level. As a result, the total VRT charge increases according to the emissions output of the vehicle involved and its market value.
Budget 2020 introduced the NOx charge which replaced a 1% surcharge on all diesel vehicles in recognition of the environmental health costs caused by pollutants emitted in particularly high quantities by diesel vehicles. Budget 2021 saw the transition to the more accurate Worldwide Harmonized Light Vehicles Test Procedure (WLTP); and restructured the VRT and motor tax regimes with a view to strengthening their environmental rationale in line with Government commitments as set out in the Programme for Government and Climate Action Plan. This included an adjustment to the NOx charge by increasing rates to incentivise the uptake of cleaner cars. The NOx charge is aligned with the polluter pays principle, with the rate increasing in line with the level of NOx emissions. The charge reflects the detrimental effect of these emissions on our environment and, in particular, impacts of older, more pollutant diesel cars.
NOx and associated emissions impact our air quality and can cause respiratory problems in humans and an increased risk of dementia. The European Environment Agency estimated at the time of the introduction of the NOx charge that there were over 1,110 premature deaths a year in Ireland related to these emissions.
Article 110 of the Treaty of the Functioning of the European Union (TFEU) provides that Member States cannot levy taxes that discriminate against imported goods or provide unfair protection to domestic goods. The Court of Justice of the European Union (CJEU) has ruled that the charging of a tax such as VRT is within the competence of a Member State provided that it does not breach Article 110 of the TFEU. The majority of other EU Member States operate broadly similar vehicle registration taxes to Ireland’s VRT. Article 110 does not prevent the imposition of new taxes, or the alteration of existing taxes provided such measures are proportional. The NOx charge is proportional and was introduced in the public interest to protect public health and the environment.
The continued compatibility of VRT with EU legislation is kept under review having regard to the development of the tax and developments in EU law. In this context, the impact of relevant court judgements is considered, and in situations where it is concluded that change to existing national legislation would be appropriate, detailed legislative proposals are developed for policy decision.
