On April 22, 2020, China’s Ministry of Industry and Information Technology announced new policies concerning the electric car industry in the country. The new policy aims to further develop the new energy vehicle industry including the consumption of electric cars.
Read our previous post about Electric Cars in China: Investing in the Country’s “Electrification
China moved to reduce the taxable purchase of vehicles to promote automobile consumption. Thus, it shows the government’s efforts to recover from the impact of the COVID-19 crisis on the industry. Keep reading.
Tax exemption on electric vehicles
Electric vehicles fall into the category of the new energy vehicle industry. Along with plug-in hybrid vehicles and fuel cell vehicles, pure electric vehicles will be exempted from purchase taxes from January 1, 2021, to December 31, 2022.
According to Announcement No. 21, MIIT has issued the catalogue of new energy vehicle models to manage the vehicle purchase tax exemption. The catalogue lists the type of new energy vehicles eligible for the purchase tax exemption. Meanwhile, the previous catalogue on new energy vehicles will remain effective until the end of the year 2020.
VAT reduction on second-hand cars
China’s MIIT also targeted second-hand vehicles or cars as part of its plan to push for automobile consumption. The ministry saw its market potential in terms of meeting the consumption demands of different cities. But in order to further attract consumers on buying second-hand vehicles, the authorities decided to levy VAT on the sales of used cars by 0.5 percent, instead of the previously reduced rate of 2 percent. The original collection rate was 3 percent. This policy support will take effect starting from May 1, 2020, to December 31, 2023.
Second-hand cars refer to used cars which are sold or relocated to other places. Last year, China has transferred a total of 3.07 million second-hand vehicles to other places, accounting for 29 percent of the total sales for used cars.
On the other hand, China also exported hundreds of used cars to Africa in a bid to eliminate high emissions. Many car dealers have begun exporting used cars to more countries including Cambodia, Myanmar, Nigeria, and Russia.