Three government ministries have announced that tax exemptions for certain new energy commercial vehicles will be phased out starting in 2027.

The Ministry of Finance, the State Taxation Administration, and the Ministry of Industry and Information Technology have jointly issued a notice detailing the changes to the Vehicle and Vessel Tax policy. The current policy, which has been in place since 2012 to support the development of the new energy vehicle industry and promote energy conservation, will see significant adjustments.

Effective January 1, 2027, the policy that halves the Vehicle and Vessel Tax for energy-efficient vehicles will be terminated. Furthermore, the full exemption from this tax for pure electric commercial vehicles, plug-in hybrid (including extended-range) commercial vehicles, and fuel cell commercial vehicles will also be rescinded. The Vehicle and Vessel Tax is an annual property tax levied on the owners or managers of vehicles and vessels.

Following the implementation of this policy adjustment, all taxpayers who own or newly acquire the affected vehicle types—including energy-efficient cars and the specified categories of new energy commercial vehicles—will be required to pay the Vehicle and Vessel Tax according to regulations.

It is important to note that pure electric passenger cars and fuel cell passenger cars are not subject to this policy change. As these vehicle types have no engine displacement, they fall outside the scope of taxation defined by the Vehicle and Vessel Tax law and will continue to be exempt from the levy.

The decision to end these tax incentives comes as China's new energy vehicle industry has matured and the number of such vehicles on the road has grown rapidly. Authorities have indicated that continuing the preferential tax treatment has increasingly led to issues concerning tax equity and has diminished the regulatory function of the tax system. The necessity to withdraw this supportive policy has therefore grown over time.

Industry experts point out that the Vehicle and Vessel Tax amount is relatively modest. For instance, the annual tax for a passenger car with a 1.5-liter engine displacement is 420 yuan in Beijing and 300 yuan in cities like Shanghai and Guangdong. The policy adjustment is seen as a move to promote tax fairness and guide the healthy, sustainable development of the new energy vehicle industry.