China exempts NEVs from 121.8 billion yuan worth of vehicle purchase tax, vehicle & vessel tax in 2023

Shanghai (Gasgoo)- On January 18, China's State Council Information Office held a press conference on the high-quality development of tax services, where Shen Xingguo, director general of the Taxpayer Service Department of the State Taxation Administration, announced that in 2023, the exemption of the vehicle purchase tax and the vehicle and vessel tax for new energy vehicles (NEVs) amounted to 121.8 billion yuan, promoting carbon reduction in the automotive industry.

In adherence to policy guidelines, the NEVs purchased from January 1, 2023, to December 31, 2023, are exempt from vehicle purchase tax.

According to data from the China Association of Automobile Manufacturers (CAAM), China's production and sales of new energy vehicles in 2023 reached 9.587 million units and 9.495 million units, respectively, marking a year-on-year jump of 35.8% and 37.9%.

The policy of exempting vehicle purchase tax for NEVs was first implemented on September 1, 2014, and has been extended three times in 2017, 2020, and 2022. By the end of 2022, the cumulative tax exemption under this policy exceeded 200 billion yuan.

To further support the development of the new energy vehicle industry and stimulate car consumption, China has once again extended the tax exemption policy for NEVs, with validity from 2024 to 2027.

The latest policy details include a full exemption from vehicle purchase tax for new energy passenger vehicles purchased from January 1, 2024, to December 31, 2025, with a limit not exceeding 30,000 yuan for each car. From January 1, 2026, to December 31, 2027, the tax on new energy passenger vehicles will be halved, with a limit not exceeding 15,000 yuan per car. 

According to the CAAM's forecast, China's total automobile sales in 2024 are expected to reach 31 million units, with new energy vehicle sales reaching 11.5 million units, which will represent a 20% year-on-year increase and a market share of 37%.