What is Vehicle Purchase Tax?
2 Answers
Vehicle purchase tax refers to a tax levied on units and individuals purchasing specified vehicles. Below are specific introductions to vehicle taxes: 1. Consumption Tax: Automobile consumption tax is a newly established tax category in China's 1994 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, three tax rates are set based on different engine displacements, levied on manufacturers. 2. Value-Added Tax (VAT): VAT is a turnover tax levied on the value added 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, with a rate of 17%. Automobile sales fall under this category. 3. Purchase Tax: A 10% vehicle purchase tax is levied on the purchase of passenger vehicles with an engine displacement of 1.6 liters or below. New vehicle purchase tax = new vehicle price (including tax) ÷ 1.17 (VAT rate of 17%) x purchase tax rate. 4. Vehicle and Vessel Tax: Vehicle and vessel usage tax is a usage behavior tax calculated and levied based on the type (such as motor vehicles, non-motor vehicles, passenger cars, cargo trucks, etc.), tonnage, and specified tax amount for vehicles driving on public roads and vessels navigating domestic rivers, lakes, or territorial ports.
Back when I bought my first car, the initial excitement quickly faded as I got a shock from the purchase tax. This tax is essentially a fee levied by the government every time you buy a new car. For example, if the car costs 100,000 yuan, the tax could be around 10,000 yuan, since the tax rate is typically 10%. The government collects this money to fund road construction and traffic management, but for me, it just added to the financial pressure. Make sure to calculate it based on the invoice price—don’t let the salesperson trick you into using the manufacturer’s suggested retail price (MSRP) for the calculation. I still remember bringing my bank card for the paperwork, only to find out the tax had to be paid separately, and I almost didn’t have enough. Luckily, new energy vehicles sometimes qualify for tax exemptions—if you buy an electric car, the policy can save you a lot. It’s best to check local regulations in advance to avoid regrets after hitting the road.
