Image Source : China Visual

BEIJING, September 27 (TMTPOST) – China will extend the exemption of purchase taxes on new energy vehicles, which was originally scheduled to expire from the end of this year to the end of 2023, according to a joint announcement issued by the Ministry of Finance, the State Taxation Administration and the Ministry of Industry and Information Technology on Monday.

It is clarified that the acquisition of new energy vehicles in the period from January 1, 2023, to December 31, 2023, is exempt from vehicle purchase tax. The country first began exempting NEVs from purchase taxes in 2014, and this is the third time that the tax-exemption policy has been extended.

The implementation of the new energy vehicles exempt from vehicle purchase tax policy will effectively stimulate the potential of new energy vehicle consumption. Vice Minister of Industry and Information Technology Xin Guobin recently introduced at a press conference at the State Information Office, from January to August this year, China's new energy vehicle production and sales reached 3.97 million units and 3.86 million units respectively, with a market share of 22.9%.

Data released by the State Administration of Taxation on August 31 showed that in the first seven months of this year, new energy vehicles were exempted from vehicle purchase tax of 40.68 billion yuan ($5.67 billion), an increase of 108.5% year-on-year. According to CCTV news, the extension of the vehicle purchase tax exemption policy for new energy vehicles until the end of 2023 is expected to bring an additional tax exemption amount of 100 billion yuan ($13.94 billion).

According to the current policy, the vehicle purchase tax is 10% of the taxable value of the taxable vehicles, which is about 8.85% of the vehicle price including VAT. Consumers can enjoy discounts ranging from thousands to tens of thousands of dollars on mainstream new energy models on the market. Take a Tesla Model Y rear-wheel-drive version of RMB 316,900 ($44,149) as an example, the vehicle purchase tax can be reduced by about RMB 28,000 ($3,900.84)  under the policy.

As the price of new energy vehicles is still generally higher than the same level of fuel cars before the full realization of oil and electricity parity, the purchase tax exemption and other preferential policies have been an important means to promote the consumption of new energy vehicles.