China Drafts New Details to Vehicle and Vessel Tax Law

Following the issuance of the “Vehicle and Vessel Tax Law of the People’s Republic of China (PRC Presidential Decree No.43)”(VVTL) passed by the Standing Committee of the National People’s Congress on February 25 this year, the Legislative Affairs Office of China’s State Council has also released the “Ordinance for the Implementation of the VVTL of PRC (Draft for Public Opinions)” (Ordinance Draft) on June 14, 2011. Both the new law and Ordinance Draft, which will replace the current 2007 interim law and its corresponding ordinance for implementation details, specify the tax rates for yachts and clarify tax incentives to green cars for the first time.

According to the VVTL, every owner or custodian of a vehicle or vessel that is mentioned in the tax rates chart attached to the law is subject to vehicle and vessel tax (VVT) payments. However, the following types of vehicles and vessels are exempt from the VVT:

• Legally registered fishing boats
• Legally registered vehicles and vessels for the exclusive use by military and armed police
• Legally registered vehicles and vessels for the police
• Vehicles and vessels belonging to foreign embassies, consulates as well as international organizations’ representative offices in China, if these entities are legally exempt from the VVT payment

The Ordinance Draft added that vehicles and vessels from foreign countries, Hong Kong, Macau and Taiwan are also tax exempt when they are permitted to temporarily enter Mainland China.

Vehicles and vessels travelling or operating within airports or ports will be exempt from the VVT for five years since January 1, 2012, according to the Ordinance Draft.

Vehicle tax
In its attached chart, the VVTL stipulated the annual tax rates of various types of vehicles.

• Passenger cars (by engine cylinder capacity)
  1. No more than 1 Liter (with seating for no more than nine passengers): RMB60 to RMB360 per vehicle
  2. 1.0 Liter to 1.6 Liter (inclusive): RMB300 to RMB540 per vehicle
  3. 1.6 Liter to 2.0 Liter (inclusive): RMB360 to RMB660 per vehicle
  4. 2.0 Liter to 2.5 Liter (inclusive): RMB660 to RMB1,200 per vehicle
  5. 2.5 Liter to 3.0 Liter (inclusive): RMB1,200 to RMB2,400 per vehicle
  6. 3.0 Liter to 4.0 Liter (inclusive): RMB2,400 to RMB3,600 per vehicle
  7. Above 4.0 Liter: RMB3,600 to RMB5,400
• Commercial vehicles
  1. Buses with seating for more than nine passengers (including trolleys): RMB480 to RMB1,440 per vehicle
  2. Trucks (including semi-trailer trucks, three-wheeled vehicles and low-speed trucks): RMB16 to RMB120 per ton (of curb weight)
  3. Trailers: 50 percent of trucks’ tax rates per ton (of curb weight)
• Other vehicles
  1. Special operations vehicles (excluding tractors): RMB16 to RMB120 per ton (of curb weight)
  2. Special wheeled mechanical vehicles (such as forklift trucks, excavators, cement mixers and truck cranes): RMB16 to RMB120 per ton (of curb weight)
• Motorcycles
  RMB36 to RMB180 per vehicle

For a vehicle whose tax rate is calculated based on its curb weight, the Ordinance Draft clarifies that:

• If the decimal part of a vehicle’s curb weight is less than 0.5 ton, it will be counted as 0.5 ton when calculating the VVT rate
• If the decimal part of a vehicle’s curb weight is more than 0.5 ton but less than 1 ton, it will be counted as 1 ton when calculating the VVT rate
• If the curb weight of a vehicle is less than 1 ton, it will be counted as 1 ton when calculating the VVT rate

As China becomes more concerned over environmental issues, the new VVTL also promises to offer tax incentives to new-energy cars. Correspondingly, the Ordinance Draft specified that the pure electric vehicles, fuel cell vehicles and plug-in hybrid vehicles can enjoy VVT exemptions, and other types of hybrid vehicles can enjoy a 50 percent tax reduction from the original tax rates for the actual type the hybrid vehicle falls in according to the tax rates chart.

Vessel tax
While annual tax rates for most vessels in the new VVTL stay the same as those in the old interim law, the new law specified annual tax rates for yachts for the first time.

• Motor vessels: RMB3 to RMB6 per ton (of net tonnage)
• Tugboats and non-motorized barges: 50 percent of the tax rates for motor vessels per ton (of net tonnage)
• Yachts: RMB600 to RMB2,000 per meter (of length)

VVT liabilities grow heavier while yacht owners or custodians have longer yachts, as the Ordinance Draft states. The actual annual tax rate for each different range of yacht sizes is

• RMB600 for yachts no longer than 10 meters
• RMB900 for yachts between 10 meters and 18 meters
• RMB1,300 for yachts between 18 meters and 30 meters
• RMB1,800 for yachts longer than 30 meters

In addition, the Ordinance Draft also added engine-equipped sailboats to the taxable yachts list, stipulating an annual tax rate of RMB600 per meter (of length).

For motor vessels, the Ordinance Draft announced detailed tax rate variation based on the tonnage difference. The annual tax rate for each different range motor vessel sizes is

• RMB3 per ton for no more than 200 ton-vessels
• RMB4 per ton for 201 to 2000-ton vessels
• RMB5 per ton for 2001 to 10,000-ton vessels
• RMB6 per ton for more than 10,000-ton vessels

Considering the fact that motor vessels that travel internationally may have already been paying vessel tonnage tax (VTT), according to a regulation issued by the General Administration of Customs back in 1952, the Ordinance Draft allowed a five-year VVT exemption – starting from January 1, 2012 – for motor vessels that have already paid the VTT.

VVT collection
The VVT shall be declared and paid annually, while it is calculated monthly, according to both documents.

The Ordinance Draft stipulates that, when insurance institutions entrusted by local tax authorities collect VVT from taxpayers, they shall include related VVT payment information in the policies of their Compulsory Traffic Accident Liability Insurance product. They shall also leave the same information on the insurance premium invoices, as an evidence of VVT collection by entrustment.

While both the VVTL and the Ordinance will take effect on January 1, 2012, China is still seeking feedback for the Ordinance Draft. The draft is open for public opinions until July 14, and to utter your opinions, you can:

• Visit http://www.chinalaw.gov.cn and publish your opinions in the System for the Collection and Management of Opinions on Executive and Legislative Drafts
• Mail letters to
  #1750 Mailbox, Legislative Office of State Council
  Beijing, 100017, PR China
  and specify your purpose with the words “Collection of Public Opinions on Ordinance for the Implementation of the VVTL of PRC ” on the envelope
• Email to ccs@chinalaw.gov.cn

 

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