More than 40,000 million euros annually: the big business of car taxes

With the arrival of the summer months comes the payment reminderof the new Catalan tax on CO₂ emissions, a tax that will affect more than one and a half million drivers in the country and which for now only applies in Catalonia. This tax, which is expected to raise more than 145 million this fiscal year, is added to a long list of direct and indirect taxes that drivers have to face to use their vehicle, expenses that must be added to the significant capital investment in the purchase process and subsequent vehicle maintenance, which we will analyze individually below.

Registration tax

The registration tax is paid by all new vehicles based on their CO₂ emissions. After several parliamentary debates, until the end of the year, all vehicles with CO₂ emissions below 144 g/km will be exempt from this tax – which represented an income of 616 million euros for the State treasury in 2019 – and from then on, the price of the tax will vary according to the car's emissions.

All vehicles that homologate emissions between 145 and 191 g/km must pay 4.75% of the vehicle's value, those that homologate between 192 and 239 g/km must pay 9.75%, and those that exceed the threshold of 250 g/km of CO₂ must pay 14.75%. The majority of new cars sold in Spain homologate emissions that place them in the first bracket, which can increase the price by approximately 1,000 euros per vehicle with a price of 20,000 euros before taxes.

VAT

Practically all new products sold in Spain must pay VAT (Value Added Tax), which is taxed at 21% in the case of cars. This tax generates the most wealth for the State treasury, as it represented an income of 6,000 million euros in the year 2025. 

If we buy a used vehicle from a private individual, we will be obliged to pay the property transfer tax, provided that this vehicle is less than 10 years old. This amount can vary by region depending on the community, the model, and the year of purchase, and in Catalonia, the Generalitat fixes it at 5% of the sale value of the car or motorcycle. Unlike VAT, which feeds the Spanish Tax Agency, this property transfer tax is collected directly by each autonomous community, and it represented total income of approximately 533 million euros during 2019.

If we opt to acquire a new rental or leasing vehicle, we will not be exempt from paying the corresponding VAT, as each monthly installment already includes the corresponding 21% VAT.

Municipal tax on motor vehicles

Although the registration tax, VAT, or property transfer tax are only paid once when acquiring a new vehicle, there are other taxes that we will continue to pay annually throughout the life of our vehicle. The municipal tax on motor vehicles (IVTM) is an example of a tax levied on each vehicle owner in their municipality, which accounted for approximately 2.8 billion euros in revenue for town halls throughout the State, representing 4.5% of the annual income of Spanish municipalities.

The final amount to be paid varies depending on the municipality, since, despite always calculating the same concept (CVF or fiscal horsepower), the payment brackets based on power depend on each town hall. For example, in Barcelona and Tarragona, vehicles up to 8 CVF pay 25.24 euros annually, those from 8 to 11.99 CVF – the most common – pay 68.16 euros, those from 12 to 15.99 CVF pay 143.88 euros, those from 16 to 19.99 CVF pay 179.22 euros, and those over 20 CVF pay 224 euros annually. In the case of electric cars, most town halls offer them a discount of up to 75% on the tax, but in some towns, these exceptions only last for a specified period of four or five years.

Taxes on fuels

The vast majority of vehicles circulating daily in Catalonia have to fill their tanks with fossil fuels to be able to run. Since we have already analyzed the taxes we pay when we fill the tank in other reports, at this point we will limit ourselves to pointing out that practically 50% of the price of a liter of gasoline or diesel are taxes collected by the state administration through the special hydrocarbon tax (IEH) and VAT. During the year 2025, the Spanish state collected more than 23,305 million euros thanks to fuel taxes, and it should be noted that this amount will presumably increase in the not too distant future with the increase in taxes on diesel.

ITV

From four years of age, all vehicles must undergo periodic inspections regarding their state of conservation and maintenance, that is, they must pass the popular ITV or vehicle technical inspection. Although this inspection is not a direct tax, it is subject to 21% VAT, and in addition to this tax, the DGT also charges a fee of 4.14 euros for noting the vehicle's registration. The DGT earns around 80 million euros each year thanks to this fee.

Tax on insurance premiums

This 2021, the General State Budgets have approved an increase in the tax on insurance premiums, which has gone from 6% to 8% and has affected the most contracted types of insurance: those for vehicles and homes. It will mean an increase in collection of more than 450 million annually for the State treasury. For practical purposes, this will mean an increase of between 8 and 10 euros for each driver who takes out or renews their insurance.

Tax on CO₂

This new tax, which only Catalan drivers pay, is specifically aimed at vehicles with emissions of more than 120 grams of CO₂ per kilometer, and in the case of vans it will be from 160 grams per kilometer. This threshold varies annually, as currently vehicles exceeding 95 grams of CO₂ per kilometer also have to pay it. In practical terms, it will mean an expense of between 8 and 18 euros for passenger cars and between 8 and 16 euros annually for motorcycles, pending future tax increases.

And electric ones, what about them?

At this point, we can confirm that zero-emission electric vehicles enjoy various tax benefits (registration tax, tax on motor vehicles, CO₂ tax...), but they are in no case exempt from paying for the electricity they use to charge their batteries. To the price of electricity and contracted power, we must add the electricity tax, which has a surcharge of 5.122% and to which VAT must then be added.