China to scrap preferential vehicle and vessel tax

China will scrap preferential annual vehicle and vessel tax treatment for a range of energy-efficient vehicles and new energy commercial vehicles from Jan 1, marking a gradual rollback of incentives that helped fuel the rapid expansion of the country's clean vehicle industry.

Under a joint notice issued by the Ministry of Finance, the State Taxation Administration and the Ministry of Industry and Information Technology, energy-efficient vehicles will no longer qualify for a 50 percent reduction in the annual vehicle and vessel tax, while battery-electric commercial vehicles, plug-in hybrid commercial vehicles, including extended-range models, and fuel-cell commercial vehicles will lose their exemption from the tax.

The vehicle and vessel tax is an annual property tax levied on owners or operators of registered vehicles and ships in China.

The tax incentives were first introduced in 2012 as part of Beijing's efforts to encourage the adoption of low-emission vehicles, reduce energy consumption and support the development of the country's new energy vehicle industry.

Following the policy change, both existing and newly purchased eligible vehicles will be subject to the annual tax in accordance with China's vehicle and vessel tax law.