China extends exemption of NEV vehicle purchase tax by another three years

Shanghai (Gasgoo)- China has decided to continue executing the preferential policy about the vehicle purchase tax, according to an announcement jointly issued by China's Ministry of Finance and the State Taxation Administration on June 28.

New energy vehicles (NEVs) purchased from January 1, 2018 to December 31, 2020 shall be exempt from vehicle purchase tax, said the announcement, which shall come into effect from July 1, 2019.

The exemption of vehicle purchase tax on new energy vehicles was put into effect from September 1, 2014. Based on the original announcement, NEVs bought between September 1, 2014 and December 31, 2017 shall be free from vehicle purchase tax. Partly thanks to the policy, China’s NEV sales had been maintaining a relatively high growth rate in recently years. Now, the government determined to extend the validity period by another three years.

Before the latest announcement, some people speculated that NEVs would no longer be exempt from vehicle acquisition tax from July 1 because the Vehicle Purchase Tax Law issued by the State Taxation Administration last year stated that from July 1, 2019, any entity or individual that acquires an automobile, a tramcar, a trailer, or a motorcycle with a gas replacement of over 150 milliliters in China shall pay the vehicle purchase tax—the tax rate shall be 10%.

Besides, the newly-issued policy also provided that a student studying abroad who returns to and serve the country shall be exempt from vehicle purchase tax on one China-made car bought with foreign exchange for his own use. In addition, an expert who comes to China for long-term residence shall also be free from vehicle acquisition tax on a car imported for his own use.