Do I Need to Pay Purchase Tax When Buying a Used Car?
2 Answers
When purchasing a used car, you generally do not need to pay the purchase tax, as the tax is only levied once, typically when the car is first bought as a new vehicle. However, if the purchase tax was not paid when the car was initially purchased, the new owner will need to pay the outstanding tax after the used car transaction. Below is an introduction to the various taxes related to vehicles: 1. Consumption Tax: The automobile consumption tax is a tax category newly established during the 1994 national tax reform and was included in the "Interim Regulations of the People's Republic of China on Consumption Tax" implemented on January 1, 1994. For passenger cars, three tax rates are set based on different engine displacements, and this tax is levied on manufacturers. 2. Value-Added Tax (VAT): The current VAT system is based on the "Interim Regulations of the People's Republic of China on Value-Added Tax" (State Council Order No. 134) promulgated by the State Council on December 13, 1993. VAT is a turnover tax levied on the value added during the circulation of goods (including taxable services). 3. Purchase Tax: New car purchase tax = (New car price including tax) ÷ 1.17 (VAT rate of 17%) x purchase tax rate. 4. Vehicle and Vessel Tax: The vehicle and vessel tax, also known as the vehicle and vessel usage tax, is a usage tax levied on vehicles traveling on public roads and vessels navigating domestic rivers, lakes, or territorial ports. The tax is calculated based on the type (e.g., motor vehicles, non-motor vehicles, passenger cars, cargo trucks, etc.), tonnage, and specified tax rates.
I've been through the process of buying used cars several times, and you really don't need to pay the purchase tax because it's a one-time payment made when a new car is registered, and it's not charged again when the car changes hands. This can save you a significant amount of money, especially for budget-conscious car enthusiasts—it's a great deal. However, don't let your guard down; there are still some miscellaneous fees to watch out for in used car transactions, such as transfer fees or registration renewal fees, which vary by local policies and usually amount to just a few hundred dollars. Remember to ask the seller to provide the original purchase tax payment certificate before buying to ensure there's no history of unpaid fees, otherwise you might face fines. To sum up my experience, the purchase tax is exclusive to new cars, so when buying used, focus your energy on checking the car's condition and negotiating the price. The money saved can even cover a thorough maintenance. Once, I was looking for a used car at a roadside market, and the seller tried to trick me by saying the tax hadn't been paid yet. Luckily, I had the habit of checking records and avoided a major pitfall.
