In order to support the development of the New Energy Vehicle Industry and promote auto consumption in China, the Ministry of Finance (MOF), the State Taxation Administration (STA), and the Ministry of Industry and Information Technology (MIIT) jointly released the Announcement on Continuing Tax Exemption on Purchases of New Energy Vehicles (hereinafter referred to as the “Announcement”), which will extend the implementation of tax exemptions until the end of 2023.

According to the Announcement, the specific provisions are summarized as follows:

1) Exemption period: New energy vehicles with an acquisition date between January 1^st 2023 and December 31^st 2023 will be exempt from Vehicle Purchase Tax (VPT).

2) The date of acquisition of new energy vehicles is determined by the date of issuance of a valid document such as the uniform sales invoice of motor vehicles or the special Customs duty payment certificate.

3) For the exemption of VPT, new energy vehicles (NEVs) need to be included in the “NEVs Models Exempted from Vehicle Purchase Tax List”, which is regulated through the Ministry of Industry and Information Technology and the General Administration of Taxation which also issued the Catalogue of New Energy Vehicle Models Exempted from Vehicle Purchase Tax.

4) Models of eligible NEVs for tax exemption are pure electric vehicles, plug-in hybrid vehicles (including programmable vehicles) and fuel cell vehicles, purchased from the date of the aforementioned Catalogue’s release.

5) In addition, NEVs that have been listed in the Catalogue before December 31^st, 2022, may continue to apply the vehicle purchase tax exemption policy in accordance with this Announcement.

Global and domestic investors have constantly been paying close attention to the Chinese policy updates on NEV subsidies, as government incentives are a key driver of industry growth. The new energy vehicle market still has considerable potential for development; meanwhile, traditional car companies are also in transition towards the new energy direction.

At PHC Advisory, our team is constantly monitoring the most recent incentives, subsidies, and exemptions accessible to businesses in China. Feel free to reach out to us at info@phcadvisory.com to find out more about preferential policies in China that your company could benefit from.