According to the tax office, soft hybrids must be treated like combustion cars, so they must be taxed at the basic excise tax rates (3.1% and 18.6%), and not at half the rates (1.55% and 9.3%). In individual interpretations, the Director of the National Tax Information argues that lower excise tax rates apply to combustion-electric hybrids. If the electric motor only supports the combustion engine, the car cannot be said to have a dual driveso a lower excise tax is excluded.
This interpretation was also given to one of the car manufacturers offering MHEV cars, i.e. Mild Hybrid Electric Vehicles, on the Polish market. He did not agree with the tax office's position and filed a complaint against the individual interpretation to the court. On Thursday, October 23, 2025, a precedent-setting judgment of the Supreme Administrative Court was passed. – This is the judgment that the entire industry has been waiting for – comments Michał Goj, tax advisor and partner in the Tax and Court Proceedings Team in the EY Tax Advisory Department.
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What was the position of the tax office and what were the rulings of administrative courts?
We wrote about problems with excise tax on soft hybrids in Business Insider at the beginning of 2025.
The tax office's position comes down to this: if the electric motor only supports the combustion engine, the car cannot be said to have a dual drive (combustion-electric), so a lower excise tax rate is excluded. Moreover, according to the tax office, this also applies to those soft hybrids that allow driving solely on the electric engine when the vehicle is already accelerating (the so-called sailing mode, which allows you to turn off the combustion engine for a short while while driving and maintain the speed on the electric engine).
Provincial administrative courts that heard disputes about excise duty on MHEV cars issued different rulings.
In the case covered by the judgment of the Supreme Administrative Court of October 23, 2023 (reference number I FSK 2037/24), a favorable decision was first issued by the Provincial Administrative Court in Warsaw (judgment of August 14, 2024, reference number III SA/Wa 1147/24). The courts found that every passenger car has a “hybrid combustion-electric drive”, which is based on the interaction of both engines – the combustion engine and the electric one. Therefore, it does not matter whether the electric engine supports the combustion engine. The court also noted that “in no provision of tax or even non-tax law has the legislator provided a legal definition (…) of the concept of hybrid combustion-electric drive.” The Provincial Administrative Court in Warsaw decided that mild hybrids are taxed with excise tax rates that are halved. The Director of KIS filed a cassation appeal against this judgment.
The Supreme Administrative Court dismissed the tax office's complaint. The judgment is final.
What follows from the precedent-setting judgment of the Supreme Administrative Court regarding soft hybrids
The NSA pointed out that there is no definition of “hybrid combustion-electric drive” in the Excise Duty Act. Moreover, the legislator did not refer to the Combined Nomenclature (CN) classification, which could help determine the excise tax rate for soft hybrids.
In this situation, according to the Supreme Administrative Court, the concept of “hybrid combustion-electric drive” should be interpreted based on the principles of linguistic and teleological interpretation.
The court did not agree with the authority that a “hybrid combustion-electric drive” must allow the car to start and move solely on the electric engine. This is not due to linguistic interpretation of the disputed article 105 section 1a letter a) and 1b of the Excise Duty Act.
Moreover, the Supreme Administrative Court noted that by amending the Act in force from January 1, 2020 (Act of October 16, 2019 amending the Act on Excise Duty, Journal of Laws, item 2116), the legislator decided to give preferential treatment to passenger cars that will be more environmentally friendly. The aim of this amendment was to provide tax preferences to solutions that contribute to reducing environmental pollution and fuel consumption. The draft shows that the new regulation was intended to complement existing preferences for electric and plug-in vehicles. “Although it is not possible to find a clear answer to the doubts in the case in the content of these documents, these findings do not contradict the position that the objectives of the amendment included a reduction in the rate for passenger cars described in the application as MHEV” – said the NSA.
What does the Supreme Administrative Court's ruling mean for manufacturers and their customers, buyers of MHEV cars?
— The Supreme Administrative Court upheld the principles of interpretation of tax law and opposed limiting the application of the reduced excise tax rate based on extra-legal criteria, comments Michał Goj. The expert points out that the automotive market is very diverse, but there is no doubt that each level of hybridization actually helps reduce pollution and reduce fuel consumption. Vehicles with mild hybrid drive constitute a very important group among cars with electrified drives. — Since the Polish legislator has decided to provide relief for all cars with a hybrid combustion-electric drive, there is no basis today to limit it only to the so-called full hybrids enabling driving solely on the electric engine – says Michał Goj. The expert adds that the judgment of the Supreme Administrative Court – although it formally resolves only one of many cases pending before the courts – will contribute to the quick conclusion of disputes over excise duty on MHEV vehicles.
The Supreme Administrative Court's ruling means no price increase for customers who want to buy such a car.
Judgment of the Supreme Administrative Court of October 23, 2023 (reference number I FSK 2037/24).
Author: Łukasz Zalewski, journalist of the Law section of Business Insider Polska
