New Energy Commercial Vehicle Tax Breaks Fully Scrapped from 2027

The Ministry of Finance, the State Taxation Administration, and the Ministry of Industry and Information Technology recently jointly issued new regulations clarifying adjustments to the vehicle and vessel tax incentives for energy-saving and new-energy vehicles, effective January 1, 2027. This marks the first major revision since these preferential policies were first implemented in 2012. Under the new policy, the existing 50% reduction in vehicle and vessel tax for energy-saving vehicles will be eliminated. All types of commercial new-energy vehicles—including battery electric, plug-in hybrid (including range-extended), and fuel cell vehicles—will no longer be exempt from the vehicle and vessel tax. The adjustment applies uniformly to both existing and newly registered vehicles, with no transitional period differentiating between old and new vehicles. The impact on private passenger vehicles is limited: privately owned battery electric and fuel cell passenger cars, which were already exempt from the vehicle and vessel tax, will retain this exemption. Privately owned plug-in hybrid and range-extended hybrid passenger cars will continue to enjoy tax exemption as well. Tax rates for conventional fuel-powered private cars remain unchanged. The primary impact falls on new-energy commercial vehicles used in freight and passenger transport, which will be required to pay vehicle and vessel tax starting in 2027, leading to higher operating costs. The policy adjustment reflects the maturation of China’s new-energy vehicle industry. The original tax incentives, introduced in 2012, aimed to support industrial development and promote emissions reductions. With the sector now possessing sufficient scale and technological capability for self-sustained growth, prolonged targeted tax benefits are seen as undermining tax equity and weakening the regulatory function of taxation. Phasing out these incentives is therefore viewed as a necessary step toward a fairer and more market-oriented tax system.