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Vehicle Acquisition Tax

18 Vehicle Acquisition Tax

TAXPAYERS

TAX BASE AND SCOPE

TAX RATES

COMPUTATION METHODS

TAX REDUCTIONS AND EXEMPTIONS

TIME LIMIT AND PLACE FOR TAX PAYMENT

This tax is levied on vehicles purchased that are specified as taxable vehicles under prevailing rules. The Provisional Regulations of the People's Republic of China on Vehicle Acquisition Tax currently in force were promulgated by the State Council on October 22, 2000, and came into effect on January 1, 2001.

Vehicle Acquisition Tax is administered and collected by the State Administration of Taxation (SAT). The revenue collected belongs to the Central Government, and is used specifically for traffic construction. In 2003, revenue from Vehicle Acquisition Tax amounted to 47.43 billion yuan, accounting for 2.3% of the country's total tax revenue.

TAXPAYERS

Entities Subject to Tax

Any of the following entities that acquire taxable vehicles may be subject to tax:

  • State-owned enterprises (SOEs), collectively owned enterprises, private enterprises, joint-equity enterprises, enterprises with foreign investment, foreign enterprises, and other enterprises.
  • Institutional units, social organizations, government organs, and army units.
  • Individual household businesspersons and other individuals.

TAX BASE AND SCOPE

General Guidelines

What Constitutes a Taxable Vehicle

The tax covers the following vehicles:

  • Motor vehicles.
  • Motorcycles.
  • Trams.
  • Trailers.
  • Transportation vehicles for farm use.

Any adjustment to the tax scope must be determined and promulgated by the State Council.

What Constitutes Acquisition of a Taxable Vehicle

Acquisition occurs when taxpayers obtain vehicles through any of the following means:

  • Purchase.
  • Importation.
  • Self-production.
  • As a gift.
  • As a prize.
  • Any other means.

Taxable Price

General Guidelines

To compute the tax payable on a taxable vehicle, the taxable price of the vehicle must first be computed.

Various rules for computing the taxable price have been formulated to cover various circumstances. Both basic and special rules are discussed below.

Assessed Price

Where the taxpayers purchase or import taxable vehicles for self-use, and where they report a taxable price that is lower than the minimum taxable price for vehicles of the same type without any argument, the minimum taxable price shall be used for tax computation.

SAT-Specified Prices

Using vehicle price information provided by production enterprises, the SAT has specified the lowest taxable prices for different types of vehicles based on average market transaction prices.

These SAT-specified prices shall act as a reference point in the calculation of taxable prices under various circumstances.

Vehicles of the Same Type

Vehicles of the same type as a taxable vehicle are those of similar origin, disposal capacity, length, and tonnage, and with similar equipment.

Basic Rules

Vehicles Purchased for Self-Use

Where a taxpayer purchases a taxable vehicle for self-use, the taxable price comprises the following expenses (except for Value-Added Tax or VAT), if they are incurred by the taxpayer when purchasing the vehicle:

  • Price of the vehicle.
  • Non-price expenses collected by the selling party in addition to the price of the vehicle (e.g., commissions, contributions to funds, indemnities for breaking contracts, packaging charges, transportation charges, storage charges, payments charged on behalf of the taxpayer, payments made on behalf of the taxpayer, other charges).
Vehicles Imported for Self-Use

Where a taxpayer imports a taxable vehicle for self-use, the following formula is used to compute the taxable price:

Taxable price = Custom dutiable price + Customs duty + Consumption Tax

Vehicles Self-Produced for Self-Use

Where a taxpayer obtains a taxable vehicle for self-use through any of the following means, the taxable price shall be determined by the relevant tax authorities after referring to the SAT-specified lowest prices:

  • Self-production.
  • As a gift.
  • As a prize.
  • Any other means.

Special Rules

Replacement of Parts

Where a taxpayer is already paying tax on a vehicle that is being registered, and where the engine or chassis of the vehicle is replaced, the lowest taxable price shall be computed at 70% of the lowest taxable price for new vehicles of the same type.

Unclear Conditions for Exemptions

Where conditions for exemption for a taxable vehicle are blurred, and where the vehicle has been in use for a period not exceeding 10 years, starting from the date of the first tax reporting, the tax base shall be the balance of the minimum taxable price for vehicles of the same type after deducting a specified percentage (10% for each full year of use).

Vehicles Without Specified Lowest Prices

Where a vehicle has no SAT-specified price, the tax base shall be the minimum taxable price of taxable vehicles of the same type.

Imported Used Vehicles

Where used vehicles are imported, and where they fall into any of the following categories, the taxable price shall be based on the information in the documents or vouchers provided by the taxpayers:

  • Vehicles damaged due to force majeure.
  • Vehicles in stock for 3 years or more.
  • Testing vehicles that have run for 80,000 km or more.
  • Other vehicles as specified by the SAT.

TAX RATES

The applicable tax rate is 10%. Any adjustment to the rate must be determined and promulgated by the State Council.

COMPUTATION METHODS

General Guidelines

Tax payable is computed based on the taxable price of the vehicle and the applicable tax rate.

In general, the following formula is used to compute tax payable:

Tax payable = Taxable price × Applicable tax rate

Example

An enterprise purchased a car for 200,000 yuan and a truck for 300,000 yuan (the prices are VAT-exclusive).

Tax payable = (200,000 yuan + 300,000 yuan) × 10% = 50,000 yuan

Exchange Rate Conversions

Where taxpayers settle payments for the acquisition of taxable vehicles in foreign currency, tax payable shall be computed by converting the currency into yuan at the basic exchange rate quoted by the People's Bank of China on the day of reporting and paying the tax (or at the exchange rate worked out in accordance with relevant rules).

TAX REDUCTIONS AND EXEMPTIONS

Exemptions or reductions may be granted under various circumstances.

Some Common Exemptions/Reductions

Diplomatic Use

Where vehicles are used by any of the following, they may be exempt of tax:

  • Foreign embassies in China.
  • Diplomatic representatives, foreign consuls, or consulates in China.
  • Representative offices of international organizations or their officers.

Military Use

Where vehicles are listed by the People's Liberation Army and the armed police army under the military weapon equipment booking plan, they may be exempt.

Fixed Vehicles

Where fixed vehicles are used for non-transportation purposes, they may be exempt. These include excavators, land levelers, forklift trucks, loading trucks, cranes, and bulldozers.

Purchases by Students Returning from Abroad

Where cars made domestically are purchased for self-use by persons returning to China after studying abroad, and where the payments are made in cash denominated in foreign currency, the cars may be exempt.

Exemptions are limited to one car per person.

Imports by Foreign Experts

Where small cars are imported for self-use by foreign experts with long-term domicile in China, the cars may be exempt.

Exemptions are limited to one car per person.

Others

  • Vehicles used specially for flood prevention or forestry fires may be exempt.
  • Three-wheel farming transportation vehicles may be exempt.
  • Other exemptions or reductions may be granted in accordance with State Council rules.

Applying for Refunds of Tax Paid

Where taxpayers have already paid tax, they may apply for tax refunds at the tax offices under any of the following circumstances:

  • Where taxpayers return vehicles because of quality problems to the production enterprises or the sellers, tax already paid on the vehicles may by refunded to the taxpayers.

    However, the refundable amount shall be reduced by 10% for each full year following the date on which the taxpayers first report and pay tax.

  • Where the vehicle administration division of the public security department refuses to handle the vehicle registration formalities for the vehicles, tax already paid on the vehicles may be refunded totally.

TIME LIMIT AND PLACE FOR TAX PAYMENT

General Guidelines

Tax shall be collected in one lump sum, and should be paid to the relevant tax authorities at the locales specified below, within the time limits specified below.

Where taxpayers purchase vehicles on which tax has already been paid, they need not pay tax again.

Places for Payment

Registered Vehicles

Taxpayers should report and pay tax on their vehicles to the relevant tax authorities in the locale where the vehicle is registered.

Unregistered Vehicles

Where the vehicles need not be registered, taxpayers should report and pay tax to the relevant tax authorities in the locales where the taxpayers are situated.

Time Limits for Payment

Vehicles Purchased for Self-Use

Taxpayers who purchase vehicles for self-use should report and pay tax within 60 days of the day of purchase.

Vehicles Imported for Self-Use

Taxpayers who import vehicles for self-use should pay tax within 60 days of the day of importation.

Vehicles Obtained Through Other means for Self-Use

Taxpayers who obtain vehicles through self-production, as a gift, as a prize, or through other means for self-use, should pay the tax within 60 days of the day the vehicles were obtained.

Failure to Make Proper Payment

Where taxpayers fail to pay tax in accordance with prevailing rules, the tax authorities have the power to order the taxpayers to settle any tax arrears.

If the taxpayers refuse to pay tax, the tax authorities may notify the vehicle administration division of the public security department to temporarily take possession of the vehicle plates.

Vehicle Registration

Taxpayers should pay tax on their vehicles before registering them with the vehicle administration division of the public security department.

At the same time, they should submit tax completion evidence or tax exemption evidence that has been issued by the relevant tax authorities.

Without such evidence, the vehicle administration division shall not handle the vehicle registration formalities.

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