The Chinese Ministry of Finance, State Taxation Administration, and Ministry of Industry and Information Technology have jointly announced an adjustment to the preferential tax policies concerning vehicle and vessel tax for energy-efficient and new energy vehicles.

According to a joint announcement, from January 1, 2027, the policy offering a 50% reduction in vehicle and vessel tax for energy-efficient vehicles will be terminated. Furthermore, the policy providing a full exemption from this tax for pure electric commercial vehicles, plug-in hybrid (including range-extended) vehicles, and fuel cell commercial vehicles will also be rescinded.

For vehicles of the aforementioned types that are newly acquired or were already owned prior to the implementation of this announcement, the vehicle and vessel tax will be levied in accordance with relevant regulations, including the Vehicle and Vessel Tax Law of the People's Republic of China and its implementing rules.

This announcement will take effect on January 1, 2027. Concurrently, specific clauses from a prior 2018 joint notice regarding tax incentives for energy-efficient and new energy vehicles and vessels will be repealed.

Background and Rationale for the Policy Change

Vehicle and vessel tax is a property tax levied annually on vehicle and vessel owners or managers. The tax amount for passenger vehicles is determined based on engine displacement, while commercial vehicles are taxed based on the number of seats or weight.

The original preferential policies—introduced in 2012 to support the development of the new energy vehicle industry and promote energy conservation—have played a positive role in encouraging consumer purchases and fostering industrial growth.

In recent years, China's automotive sector, particularly the new energy vehicle market, has experienced rapid expansion. In 2025, new energy vehicle sales in China reached 16.49 million units, with their share of domestic new car sales exceeding 50%.

Vehicles such as pure electric commercial vehicles, plug-in hybrids, fuel cell commercial vehicles, and energy-efficient cars now represent significant assets, comparable in value to traditional fuel-powered vehicles. For instance, the average sales price for a plug-in hybrid passenger car in 2025 was 218,000 yuan, with some models priced over one million yuan.

Reinstating the vehicle and vessel tax on these vehicle types is intended to promote tax equity and enhance the tax system's role in regulating income distribution.

Taxation Status for Pure Electric and Fuel Cell Passenger Cars

According to the Vehicle and Vessel Tax Law, pure electric passenger cars and fuel cell passenger cars are not subject to vehicle and vessel tax and remain exempt.

Application of the Policy to Pre-Existing Vehicles

For the four categories of vehicles (pure electric commercial vehicles, plug-in hybrids, fuel cell commercial vehicles, and energy-efficient vehicles) acquired before the announcement takes effect, the preferential tax policies will no longer apply from January 1, 2027. Owners will be required to pay the vehicle and vessel tax as stipulated.

Calculation and Payment Procedures Post-Implementation

Starting January 1, 2027, the tax for these four vehicle categories will be calculated based on the specific tax amounts determined by provincial-level governments according to the official tax schedule.

There are two primary methods for tax payment. One involves insurance institutions collecting and remitting the tax when compulsory traffic accident liability insurance is purchased. The other method requires vehicle owners to file and pay the tax themselves.

For self-declaration, owners can use online channels, such as their local electronic tax bureau, or visit tax service halls in person at the vehicle's registration location.

The vehicle and vessel tax is an annual levy, calculated monthly but paid in a lump sum. The specific payment deadline is set by provincial authorities. If the tax is collected by an insurance agency, payment is due concurrently with the purchase of the compulsory insurance.

Determining the Tax Payment Location

For registered vehicles, if the taxpayer files independently, payment should be made at the vehicle's registration location. If paid through an insurance agency, payment is made at the agency's location. Once the tax is collected and remitted by an insurance institution, the taxpayer is not required to file separately with the tax authority. For vehicles not requiring official registration, the tax should be paid at the location of the vehicle's owner or manager.