Issuance Date: December 2, 2011     Source: China Taxation News
    The Executive Meeting of the State Council considered and approved the Regulations for the Implementation of the Law of the People's Republic of China on Vehicle and Vessel Tax (Draft).
    The Law of the People's Republic of China on Vehicle and Vessel Tax was adopted at the 19th Session of the 11th NPC Standing Committee on February 25, 2011, and will come into effect since January 1, 2012. To ensure the effective implementation of the Law, the State Council, based on the related provisions of the Law, issued the Regulations for the Implementation of the Law of Vehicle and Vessel Tax. The Regulations refined the scope of taxable vehicles and vessels, specified the principles for the provincial governments to determine the tax on vehicles, set specific applicable tax on motor vessels and yachts and detailed the provisions of tax incentives.
    The Law of Vehicle and Vessel Tax adopted at the 19th Session of the 11th NPC Standing Committee on February 25, 2011 adjusted the tax system elements of the Interim Provisions for the Vehicle and Vessel Tax by improving scope of taxation, reforming tax assessment basis for vehicles, changing tax burden structure, regulating tax incentives and tightening tax management. For the tax payers, the most significant changes can be seen in reforming tax assessment basis for vehicles and changing tax burden structure.
    In terms of reforming tax assessment basis for vehicles, the Interim Provisions for the Vehicle and Vessel Tax and its implementation rules stipulate that mini- and small-sized passenger vehicles shall be subject to tax by vehicle. As the property tax, the vehicle and vessel tax shall adopt the asset appraisal value as the tax assessment basis. However, a large number of passenger vehicles in different families make it hard to appraise their values. Since there's a positive relationship between a vehicle's displacement and value, the Law adopts displacement as the basis of tax assessment.
    In terms of changing tax burden structure, the Law, to support the development of transportation industry, still uses the original tax amount for vans, which account for some 28% of all the vehicles, motorbikes and vessels (except yachts), raises slightly the tax amount of passenger vehicles with a capacity of nine passengers or above, and reduces the tax amount of trailers to 50% of tax amount applicable to vans. For another, to utilize the regulatory functions of vehicle and vessel tax more effectively and guide the automobile consumption and energy conservation and emission abatement, the Law makes the structural adjustment, like reduction, no change and increase, in the tax amount of passenger vehicles (the vehicles with a capacity of less than nine passengers), about 72% of all the vehicles, according to the engine capacity. First, the tax amount shall get lowered or remain unchanged for the passenger vehicles with the engine capacity of 2.0L or less, about 87% of all the passenger vehicles. Second, the tax amount shall get slightly increased for the passenger vehicles with the engine capacity of 2.0L to 2.5L, about 10% of all the passenger vehicles. Third, the tax amount shall get considerably increased for the passenger vehicles with the engine capacity of 2.5L or more, about 3% of all the passenger vehicles. The leaders from the Department of Taxation of the Ministry of Finance and the Department of Property and Act Tax of the State Administration of Taxation, when interpreting the Law of Vehicle and Vessel Tax, pointed out that the tax burden will remain unchanged, but there're some structural adjustments.
    Moreover, the Provisional Regulations of the People's Republic of China on the Vessel Tonnage Dues (Draft) was also considered and adopted at the Executive Meeting of the State Council. Vessel tonnage dues are a type of tax levied by the customs for the foreign vessels which enter our domestic ports, and the tax amounts are mainly used for the construction and maintenance of ports and public sea markers along the main routes. Considering the new situations and problems, the related departments of the State Council improved the Interim Measures of the Customs Concerning Vessel Tonnage Dues as issued in 1952, and formulated the Provisional Regulations of the People's Republic of China on the Vessel Tonnage Dues (Draft), which was considered and adopted at the Executive Meeting of the State Council.