2025 will be the final year for China’s exemption from vehicle purchase tax (hereinafter referred to as “vehicle purchase tax”) for new energy vehicles, with taxation resuming in 2026, though preferential policies will remain in place.
Recently, the amount of vehicle purchase tax that new energy vehicles will need to pay next year has attracted attention, even trending online. Units and individuals purchasing vehicles within China are required to pay vehicle purchase tax, but to support the development of the new energy vehicle industry, China has exempted new energy vehicles from this tax from 2014 through the end of this year.
According to the “Announcement on Extending and Optimizing the Preferential Policy for New Energy Vehicle Purchase Tax” issued by the Ministry of Finance and other departments in 2023, new energy vehicles purchased between January 1, 2026, and December 31, 2027, will be subject to a 50% reduction in vehicle purchase tax, with the tax reduction for each new energy passenger vehicle not exceeding 15,000 yuan.
This means that individuals and units purchasing new energy vehicles in 2026 and 2027 will have vehicle purchase tax reinstated, but can still enjoy the preferential policy of a 50% tax reduction. The current vehicle purchase tax rate is 10%, so the 50% reduction for new energy vehicles translates to an effective tax rate of 5%.