The Ministry of Finance, the State Taxation Administration and the Ministry of Industry and Information Technology have jointly issued Announcement No. 19 of 2026, announcing a major adjustment to the vehicle and vessel tax preferential policies for energy-saving and new energy vehicles. From January 1, 2027, several long-standing tax benefits will be officially abolished. Will your car be affected? Read on and you will know exactly where you stand.
1. The Official Announcement: Two Tax Breaks End in 2027
In one sentence: from January 1, 2027, energy-saving vehicles no longer enjoy the 50% tax reduction, and pure electric commercial vehicles, plug-in hybrids (including extended-range) and fuel cell commercial vehicles no longer enjoy full exemption.
One category is completely unaffected: pure electric passenger cars and fuel cell passenger cars do not fall within the taxable scope of vehicle and vessel tax at all, and remain exempt. In short, your Tesla, NIO or BYD pure electric sedan will continue to pay nothing, just as before.
Key point: this adjustment does not distinguish between old and new vehicles — existing and newly added vehicles will all be taxed under the same rules. Whether your car was purchased in 2018 or delivered at the end of 2026, the new rules apply uniformly from January 1, 2027.
2. Why Now? Tax Fairness and Policy Graduation
This adjustment did not come out of nowhere — it is the natural result of industrial policy and the evolution of tax logic.
First, promoting tax fairness and returning vehicle and vessel tax to its nature as a property tax. Vehicle and vessel tax is a property tax, levied annually on the owners or administrators of vehicles and vessels, calculated by engine displacement and by unit, in pursuit of equal tax burdens. In recent years, a plug-in hybrid sedan priced at RMB 218,000 and a fuel mini-van priced at RMB 100,000 enjoyed completely different treatment — the former paid nothing year after year while the latter paid tax every year. Some high-end plug-in hybrid models even sell for over RMB 1 million, still without paying a cent. Vehicles with the same displacement and same use bore wildly different tax burdens — plainly unfair.
Second, the support policy is exiting in an orderly manner; the industry is ready to “leave the nest”. This preferential policy has run since 2012, more than a decade. Over that period, China’s new energy vehicle market penetration has exceeded 50%, and NEV sales reached 16.49 million units in 2025. The industry has moved from being “helped onto the horse” to “running on its own”. The historical mission of small “red packet” benefits like the vehicle and vessel tax preference is complete, and policy needs to return to neutrality, letting enterprises compete on technical efficiency, cost control and user experience.
3. What You’ll Pay: Rates, Exemptions and How to Pay
One premise first: vehicle and vessel tax is a local tax — the specific tax amounts are not unified nationwide. The state only sets statutory tax ranges; each province, autonomous region and municipality may determine its own applicable amounts within those ranges, based on local economic development, fiscal conditions and traffic management needs. The actual amount you pay therefore follows the applicable rates published by the provincial government where your vehicle is registered.
Reference figures from the announcement:
- Plug-in hybrid passenger cars with 1.6L–2.0L engine displacement: provinces generally set RMB 360–660 per year (hybrids and extended-range vehicles pay at the passenger car rate corresponding to their engine displacement).
- Buses (9 seats or more): RMB 480–1,440 per vehicle per year.
- Trucks: RMB 16–120 per ton of curb weight per year.
The exemptions and preferences that remain in force:
| Situation | Tax treatment |
|---|---|
| Fishing and aquaculture vessels | Exempt |
| Vehicles and vessels exclusively for military or armed police use | Exempt |
| Police vehicles and vessels | Exempt |
| National comprehensive fire rescue vehicles and vessels with dedicated emergency plates | Exempt |
| Vehicles and vessels of foreign embassies, consulates, international organizations in China and their personnel, where law requires exemption | Exempt |
| Public transport vehicles and vessels; motorcycles, three-wheelers and low-speed cargo vehicles owned by rural residents and used mainly in rural areas | Reduced or exempted by provincial governments based on actual circumstances |
| Taxpayers facing payment difficulties due to serious natural disasters or other special reasons genuinely requiring reduction or exemption | Reduced or exempted by provincial governments based on actual circumstances |
How to pay: there are two ways. First, withheld and paid by your insurer when you buy compulsory traffic insurance. Second, self-declaration — file online through the electronic tax bureau’s “consolidated declaration of property and conduct taxes” module, or visit the tax service hall where the vehicle is registered. Vehicle and vessel tax is declared annually, calculated monthly and paid in one lump sum.
Frequently Asked Questions
Q1: I bought my car in 2026 — do I still have to pay in 2027?
Yes. This adjustment does not distinguish between existing and new vehicles. Whether your car was bought in 2018 or delivered at the end of 2026, the new rules apply uniformly from January 1, 2027.
Q2: Is my pure electric sedan (Tesla, NIO) affected?
No. Pure electric passenger cars and fuel cell passenger cars are simply outside the taxable scope of the Vehicle and Vessel Tax Law — they were never taxed and will not be taxed. This adjustment targets commercial vehicles and hybrids.
Q3: How is vehicle and vessel tax paid?
Two ways: first, withheld and remitted by the insurer when you purchase compulsory traffic insurance; second, self-declaration through the electronic tax bureau’s “consolidated declaration of property and conduct taxes” module, or in person at the tax service hall where the vehicle is registered. The tax is declared annually, calculated monthly and paid once.
Q4: What exactly counts as an “energy-saving vehicle”?
Mainly passenger cars with engine displacement of 1.6L or below, running on gasoline or diesel, that meet certain energy-saving standards (including non-plug-in hybrids, dual-fuel and bi-fuel passenger cars). These previously enjoyed the 50% reduction; from 2027 they pay the full amount.
Q5: Roughly how much will a plug-in hybrid cost per year?
Take a plug-in hybrid passenger car with 1.6L–2.0L displacement: provincial rates generally run RMB 360–660 per year. Plug-in hybrids and extended-range vehicles pay at the passenger car rate corresponding to their engine displacement.
Q6: What about new energy trucks and buses?
Pure electric commercial vehicles and fuel cell commercial vehicles resume taxation from 2027. Buses (9 seats or more) pay RMB 480–1,440 per vehicle; trucks pay RMB 16–120 per ton of curb weight. The specific amounts follow the rates published by your local government.
If your company operates a vehicle fleet in China — or is budgeting its 2027 tax exposure — our tax services team can map each vehicle's tax position under the new rules and handle the filings. For broader context on China's 2026 tax compliance calendar, see our corporate income tax annual reconciliation guide; if you are still structuring your China presence, start with how to set up a subsidiary, and keep your books in order per our accounting records retention guide. Questions? Contact us directly.
Disclaimer: This article is provided for informational purposes only and does not constitute legal, tax or professional advice. Tax amounts vary by province; always confirm the applicable local rates with the provincial tax authorities where your vehicle is registered. For advice specific to your situation, please consult a qualified professional at Dan Young Business Consultancy. Contact us at [email protected] or call/WeChat: +86 18565453956.
