Shanghai (ZXZC)- China has extended the exemption of purchase taxes on new energy vehicles (NEVs) by another year to the end of 2023, as part of measures to boost auto sales and the NEV industry development, according to a notice today jointly issued by China's Ministry of Finance, State Taxation Administration, and Ministry of Industry and Information Technology ("MIIT").

The NEVs enjoying the tax exemption will be included into catalogues issued by the MIIT and the State Taxation Administration as an approach of governmental management.

BYD Tang EV; photo credit: BYD

According to the Chinese policy, NEVs refer to all-electric vehicles, plug-in hybrid electric vehicles (including range-extended electric vehicles), as well as fuel cell vehicles.

Prior to the latest notice release, the decision to extend NEV purchase tax exemption was approved by China’s State Council at an executive meeting held on August 18.

To support the development of the NEV industry, China began exempting NEVs from purchase tax in 2014. The policy originally expired at the end of 2017, but was firstly extended to the end of 2020.

In April 2020, the government announced it would once again extend the tax exemption on NEV purchases by an additional two years to better promote the sector's development and boost auto sales.

For the first eight months of this year, there were 3.97 million and 3.86 million NEVs produced and sold across China, up roughly 120% and 110% year over year, according to data by the China Association of Automobile Manufacturers ("CAAM").