EREV: Are electric cars with range extenders exempt from IUC and ISV in Portugal?

Electric vehicles with range extenders are becoming increasingly prominent, driven above all by Chinese manufacturers. Having established themselves in their home market, several of these models are now starting to arrive in Europe, where they are positioned as an alternative to conventional electric cars and plug-in hybrids.

Known by the acronym EREV (Extended Range Electric Vehicle), these vehicles can be charged from a socket or charging point and are always propelled by one or more electric motors. Their combustion engine has no mechanical connection to the wheels: it works solely as a generator, producing electricity as battery charge falls and enabling longer journeys without stopping to recharge.

EREV and IUC exemption in Portugal

At first glance, they appear to be genuine electric cars. This is exactly what raises the question: if an electric motor alone drives the vehicle, are EREVs also exempt from IUC and ISV in Portugal?

The answer is not determined solely by how power reaches the wheels. Although one or more electric motors always provide propulsion, the Portuguese State considers the presence of a combustion engine to change these vehicles’ tax treatment, even when it operates only as a generator.

As a result, while fully electric cars are exempt from paying IUC in Portugal, EREVs do not receive the same treatment. For tax purposes, they are generally handled in much the same way as plug-in hybrids.

How is IUC calculated for EREVs?

For EREVs registered as category B passenger cars, IUC is calculated under the same rules that apply to other combustion-engine cars first registered from July 2007 onwards.

The calculation is based on two elements: the engine capacity of the combustion unit and the approved carbon dioxide (CO₂) emissions. Higher figures in either category result in higher IUC. The amount calculated is then multiplied by a coefficient set according to the year of first registration.

In practice, many EREVs pay less IUC than a purely combustion-powered car of comparable size and output, because of their lower approved emissions and, in some cases, the smaller capacity of the combustion engine.

There is, however, no single IUC amount for all EREVs. The tax always depends on each vehicle’s approved specifications and date of first registration.

What other tax benefits apply to EREVs?

Even though they do not qualify for IUC exemption, EREVs may benefit from the tax regime applicable to plug-in hybrids. Once again, eligibility depends on the approved characteristics of each model.

For ISV, plug-in hybrids qualify for an intermediate rate equal to 25% of the tax where they have a minimum electric range of 50 km and official CO₂ emissions below 50 g/km.

From 2026, models approved under the Euro 6e-bis standard can retain this ISV reduction with emissions of up to 80 g/km of CO₂, provided they still offer at least 50 km of electric range.

For businesses, reduced autonomous taxation rates still require a minimum electric range of 50 km and official CO₂ emissions below 50 g/km.

Therefore, an EREV, or electric vehicle with a range extender, is not exempt from IUC. Nor does it automatically qualify for the remaining tax benefits. The applicable regime is determined by the vehicle’s classification, electric range, approved emissions and approval standard.