Türkiye revises tax thresholds to help cut car prices, drive sales

In a move that is expected to help cut car prices, Türkiye has revised price thresholds for a special consumption tax (ÖTV) on some automobiles, according to a Presidential decree in the Official Gazette on Thursday.

The new price threshold for cars with engines of up to 1,600 cubic centimeters (cc) in the 45% tax bracket has been increased to TL 184,000, up from TL 120,000, the decree showed.

The change will see the threshold for vehicles subjected to a 50% tax rate increased from TL 150,000 to TL 220,000.

The maximum price for the tax rate of 60% was raised from TL 175,000 to TL 250,000, and the threshold for the 70% tax rate was raised to TL 280,000, up from TL 200,000, the decree showed.

For hybrid vehicles with power exceeding 50 kilowatts and engine cylinder volume above 1600 cc but below 1800 cc, the threshold for the tax rate of 45% has been increased to TL 228,000, up from TL 130,000.

The threshold for a 50% tax rate has been increased to TL 350,000 from TL 210,000, the decree said.

This amendment is expected to help reduce the country’s current account deficit by encouraging households to opt for vehicles manufactured in Türkiye and add to efforts to curb inflation that climbed to a 24-year high of 85.5% in October.

Overall sales of passenger cars and light commercial vehicles in Türkiye slipped 4.7% year-over-year in the first 10 months to 585,752 units, according to the data from the Automotive Distributors Association (ODD). This change is driven by soaring prices and problems of logistics bottlenecks to an ongoing chip shortage leading to curbed production.

Car sales were down 6% from a year ago to 446,664 vehicles, while light commercial vehicles saw a more moderate drop of 0.4% to 139,088, according to the ODD.

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