Understanding China's Car and Vessel Tax

Up until recently the burden of taxation was pushed onto farmers, now Chinese farmers are nothing compared to American farmers that have massive swathes of land for as far as the eye can see in the Mid West, Chinese farmers are mostly substance farmers with small tracts of land that are mostly toiled by hand. With the growing Chinese middle class the burden of taxation is moving up the pay scale, farmers no longer pay land tax but the government has to collect tax elsewhere to offset the loss at treasury coffers, thus the government turned to 'luxury items' such as pleasure craft and vehicles.

Tax on cars has being going up in recent years, originally the 'Yang Lu Fei' was used and then abandoned. The Yang Lu Fei which literally means 'care for the road tax' was paid monthly and went off the weight and no of seats in your vehicle, a 5 seat mini car paid around 100rmb per month, larger 7 seat vehicles around 200rmb. Eventually this was scrapped and rolled into gasoline prices which made for an easier system, car owners no longer had to pay a monthly tax and random roadside tax inspections ended.

The new tax system is called the Car and Vessel Tax, a clumsy name but nevertheless it is a much needed tax, tax is counted as follows:

(1) Taxpayers

Taxpayers include enterprises, units, individual household businesses and other individuals who possess and operate vehicles and/or vessels within the territory of the People's Republic of China (excluding enterprises with foreign investment, foreign enterprises and foreigners).

(2) Tax base, tax amount per unit and computation of tax payable

Taxes for vehicles and vessels are calculated slightly differently:

a. For vehicles: 60 to 320 yuan per passenger vehicles; 16 to 60 yuan per ton ( net-tonnage ) for cargo vehicles; 20 to 80 yuan per motorcycle; 1.2 to 32 yuan per non-motorized vehicle.

b. For vessels: 1.2 to 5 yuan per net tonnage for motorized vessels; 0.6 to1.4 yuan per deadweight tonnage for non-motorized vessels.

So who is excluded from this tax? Of course government organs and military appliances don't to pay, yes, the government with the largest fleet of vehicles in the world is exempt:

Tax may be exempt on the vehicles and vessels self-used by governmental organs, people's organizations and military units; the vehicles and vessels self-used by units financed by financial fund allocation; the fishing vessels with a deadweight capacity not in excess of one ton; the pontoons and floating docks used exclusively for passengers, the loading or unloading of cargo and the storage of goods; the vehicles and vessels used by police department, fire department, health department and environmental department; the vessels subject to payment of Vessel Tonnage Tax according to Rules; special vehicles designed for the convenience of the handicapped; and the tractors used mainly in agriculture production.

What does this mean in the real world?

Taxes will look like this per year for automobiles in 2012:

Sub 1.0L vehicles – 300RMB
1.0 to 1.6L – 420RMB
1.6 to 2.0L – 480RMB
2.0L to 2.5L – 900RMB
2.5L to 3.0L – 1,920RMB
3.0L to 4.0L – 3,480RMB
4.0L and above – 5,280RMB

Taxes will be collected by insurance companies on yearly premiums and will form the basis of all insurance policies in 2012. The new taxes are aiming to steer Chinese car consumers away from large displacement vehicles and into smaller more fuel efficient models. For example, the Ford Mondeo originally came with a 2.3L engine but later came with a 2.0L Ecoboost model, older 2.3L Mondeo's will have to pay a tax of 900rmb but the newer more powerful Ecoboost models will be eligible for 480rmb of taxation. The big winners from this tax policy are those companies that already have a turbo powered models on the market, such as VW's TSI range, Chinese manufacturers are playing catch up but the days of using off the shelf 2.4L Mitsubishi engines are over.

The vessel tax is not aimed at common small scale fishing vessels but at the rise of large yachts, the Chinese yachting industry has grown rapidly in the past few years as yachts have taken over cars as the number one way to flash your cash.

Ash

Ash came to China at 18 on a whim and never left. Some 10 years later he collected a degree and a family along the way and now focuses his time on watching the Chinese car industry develop. He has witnessed the market change from being minor backyard market in to the world’s biggest and most important market for all car manufacturers. You can contact or connect with him via Linkedin by clicking the ‘Website’ link.

Website – More Posts

See more here:
Understanding China's Car and Vessel Tax