What is Vehicle Purchase Tax?
2 Answers
Vehicle purchase tax refers to a tax levied on units and individuals who purchase specified vehicles. Below are the specific details about vehicle taxes: Consumption Tax: Automobile consumption tax is a newly established tax category in the 1994 national tax reform, included in the "Provisional Regulations of the People's Republic of China on Consumption Tax" effective from January 1, 1994. For passenger cars, it sets three tiers of tax rates based on different vehicle types and engine displacements, levied on manufacturers. Value-Added Tax (VAT): VAT is a turnover tax levied on the value-added amount generated during the circulation of goods (including taxable services). It applies to the sale of goods, provision of processing, repair, and replacement services, import of goods, and provision of tangible movable property leasing services, etc., at a rate of 17%. Automobile sales fall under this category. Purchase Tax: A 10% vehicle purchase tax is levied on passenger vehicles with an engine displacement of 1.6 liters or below. The formula for new vehicle purchase tax is: New vehicle price (including tax) / 1.17 (VAT rate of 17%) x purchase tax rate. Vehicle and Vessel Tax: Vehicle and vessel usage tax is a behavioral usage tax calculated and levied based on the type (e.g., motor vehicles, non-motor vehicles, passenger cars, cargo trucks, etc.), tonnage, and specified tax amount for vehicles traveling on public roads and vessels navigating domestic rivers, lakes, or territorial ports.
The vehicle purchase tax is an extra amount you have to pay to the government when buying a car, and it's nothing to scoff at. Last time I bought a car with an invoice price of 150,000 yuan, the tax alone came to 15,000 yuan, sending the overall cost skyrocketing—it really hurt. The calculation is straightforward: it's 10% of the invoice price, and it must be paid in full before the license plate registration process. This fee is substantial, taking up a significant chunk of the total expenses, and the government uses it for things like road construction. The policies are a bit better now—back in the day, the tax rate was even higher. New energy electric vehicles are even tax-exempt, like Teslas, which not only save you on taxes but are also eco-friendly. My advice is to negotiate hard to lower the invoice price before buying a car—that way, the tax will naturally be less. You can also opt for tax-exempt models or keep an eye out for promotional periods to make your move.
