The Chinese government confirmed on Wednesday a two-year extension to purchase tax exemption for new energy vehicles capped at a maximum of CNY 30,000 ($4,169) per vehicle, Kallanish learns. 

The announcement from China’s Ministry of Finance, State Taxation Bureau, and Ministry of Industry and Information Technology explains the policy on NEV acquisition tax has been optimised and the allowance is expected to exceed $88 billion by 2027 – CNY 115 billion in 2023 and CNY 510 billion during 2024-2017.

 Besides the two-year extension, for NEVs purchased between 1 January 2026 and 31 December 2027, the purchase tax will be halved, with the tax reduction amount limited to CNY 15,000/vehicle.

The main difference in the new policies is that they set limits on tax reduction and exemption amounts. The benefit is applicable to battery electric, plug-in hybrid (including extended range) and fuel cell electric vehicles, with no more than nine seats.

“We want to avoid some high-end luxury cars occupying too many tax incentive resources,” explains Xu Hongcai, deputy minister of finance. "We want to improve the accuracy and effectiveness of tax policies. We expect to better excel the positive effects through dynamic increases of the threshold.”

For battery-swapping mode NEVs, the vehicle acquisition tax is determined based on the non-battery part’s invoice price since the batteries and the vehicle bodies are usually sold separately. 

The authorities said they will punish mismatches and fake information to ensure the legal application of the reduction and exemption policies. 

Previously, the NEV acquisition tax exemption policy was said to last till the end of this year, as government officials confirmed in August 2022. It has been in place 2014 and has been extended three times. It was designed to encourage NEV uptake.

Currently, the standard acquisition tax, applicable to conventional cars, is 10% of the vehicle invoice price excluding the 17% value-added tax.