Interpret the Reduction of Vehicle Purchase Tax

Authorized by the State Department, the Ministry of Finance of the People's Republic of China and the State Administration of Taxation has jointly issued the Notice the Ministry of Finance of the People's Republic of China and the State Administration of Taxation on the Reduction of Vehicle Purchase Tax on Passenger Cars with 1.6L or under Delivery Capacity (CaiShui No. 12 [2009]) recently, to reduce the collection of vehicle purchase tax on part of the passenger cars.

Stuck by the world-wide financial crises, the global automobile market is facing a severe situation at present. Chinese auto market is affected by the international either. In order to revive the auto market, the State Department decides to reduce the vehicle purchase tax on part of passenger cars. The issuance of reduction policy will play a significant role in cultivating automobile consumption market, effectively encourage automobile consumption, expanding domestic demands, as well as facilitating the steady and rapid development of domestic automobile industry.

The adjustment of policy mainly refers to:

1. Provisionally reduce 5% vehicle purchase tax on passenger cars with 1.6L or under delivery capacity from January 20th 2009 to December 31st, 2009. The time of implementation refers to the date of purchasing the cars rather than the date of tax declaration. The date of purchase shall be defined as the date on the effective documents, like the Uniform Invoice of Motor Vehicle Sale or the Special Covering Warrant for Customs Duties.

2. The Passenger Cars which vehicle purchase tax can be reduced refer to those are technically and characteristically designed to carry passengers, their accompanied luggage, and (or) provisional articles, the seats of which cannot exceed 9 including the driver's seat. Details refer to the following:

(1) Homemade Sedans: The Certificate of Approval for the Whole Vehicle of the People's Republic of China (hereinafter referred to as Certificate) specifies that the code number of this type of vehicle is 7, and the delivery capacity and power (ml/kw) of this type of vehicle shall not exceed 1600ml.

(2) Homemade Passenger Coaches: The Certificate specifies that the code number of this type of vehicle is 6, the delivery capacity and power (ml/kw) of this type of vehicle shall not exceed 1600ml, and the rated capacity (ppl) shall not exceed 9.

(3) Homemade SUVs: The Certificate specifies that the code number of this type of vehicle is 2, the delivery capacity and power (ml/kw) of this type of vehicle shall not exceed 1600ml, the rated capacity (ppl) shall not exceed 9, and the rated contained mass (kg) shall be less than the arithmetic product of rated capacity by 65kg.

(4) Homemade Special-purpose Vehicles: The Certificate specifies that the code number of this type of vehicle is 5, the delivery capacity and power (ml/kw) of this type of vehicle shall not exceed 1600ml, the rated capacity (ppl) shall not exceed 9, and the rated contained mass (kg) shall be less than the arithmetic product of rated capacity by 65kg.

(5) Imported Passenger Vehicles: Refer to technical parameters of the same types of homemade vehicles.

In order to guarantee full implementation and fulfillment of the reduction policy, and real convenience and services for taxpayers, the State Administration of Taxation requires tax authorities at all levels to positively prepare for the reduction policy, adjust the vehicle purchase taxation system, simplify declaration procedures for tax reduction, train tax collection and control personnel, and assure on-time implementation of the tax reduction policy.