The Energy Division within the Ministry of Infrastructure, Ports, and Energy is providing clarification on its concessionary tax policy for low-emission vehicles.
In a statement shared by a National Competitiveness and Productivity Council official, according to the Energy Division, the applicable basis for the concession defines qualifying hybrid vehicles as those that utilise “two or more distinct forms of onboard energy, each of which can propel the vehicle.” Vehicles without the capability “to propel in full electric mode do not qualify for the concession, even if they are marketed or described as ‘hybrid’”.
Vehicle descriptions and the Customs HS 2022 classifications for which concessions apply, effective December 1, 2025, are outlined in Statutory Instrument Number 222 of 2025.
The initiative references the Customs Duties (Amendment of Schedule 4) (No. 4) Order, 2025, which states: “The rate of customs duty… comes into force on the 1st day of December, 2025 and ends on the 30th day of November, 2026.”
The government further highlighted the distinction between “hybrid” and “mild hybrid” vehicles. The latter, according to the Energy Division, incorporates limited electric components that support fuel efficiency functions such as engine assistance or start-stop systems, but are not able to propel the vehicle using electric power alone. Instead, propulsion is achieved solely through the internal combustion engine (gas or diesel), which results in “no meaningful reduction in tailpipe emissions.”
“As such, ‘mild hybrid’ vehicles do not meet the legal requirement of utilising two or more distinct forms of onboard energy, each capable of propulsion, and therefore do not qualify for the tax concession under the existing policy and legislative framework,” said the government release.
The current Order follows earlier import duty waivers and tax concessions on low-emission and fuel-efficient vehicles that were in effect during the current government’s first term in office. These concessions were later extended, covering the period from December 1, 2023, to August 30, 2024.
Acknowledging previous practice where ‘mild hybrid’ vehicle imports had received fee waivers, the government advises that all such vehicles ordered before January 1, 2026, will still receive the tax concessions, “so as to allow for a transitional adjustment period.”
The ministry hopes the clarification will ensure closer alignment between national policy objectives, legislative requirements, and the intended environmental outcomes of the concessionary regime.
The department explained that the policy was initially implemented to make the shift to electric vehicles more affordable for car owners, and to encourage movement away from traditional internal combustion engine (ICE) vehicles that rely solely on fossil fuels. A long-term objective is the full electrification of the transport sector. To this end, the government’s hybrid vehicle tax concessions policy is intended to bridge the gap between electric vehicles and conventional ICE vehicles.
“As a result, a transitional incentive regime was introduced to encourage the uptake of hybrid vehicles as an interim step toward full electric mobility,” said the government release.
For additional information, stakeholders can read the Statutory Instrument Number 222 of 2025 below, contact the Energy Division at telephone number 1(758)468-6363 or via email at cepuo@govt.lc.
