In order to guide rational consumption, and promote energy conservation and emissions reduction, the SAT and MOFCOM jointly issued the Notice regarding Additional Levy of Consumption Tax on Ultra-Luxury Cars (Cai Shui [2016] No. 129) on 30 November 2016. The notice took effect on 1 December 2016.

Cai Shui [2016] No. 129 defines ultra-luxury cars as passenger cars or medium and light commercial vehicles with a retail price of CNY 1.3 million and above (excluding VAT).

Consumption tax continues to be levied at the current rate at the production or import stages. The additional consumption tax is levied at the rate of 10% at the retail stage. Entities and individuals selling ultra-luxury cars to consumers are the taxpayers liable to pay the 10% consumption tax at the retail stage.

The formula for consumption tax payable on ultra-luxury cars at the retail stage is:

Tax payable = sales revenue at retail stage (excluding VAT) x 10%

Ultra-luxury cars sold directly by domestic automobile manufacturers to consumers are subject to consumption tax that is calculated at the aggregate of the rates at the production stage and the retail stage. The formula for consumption tax payable on direct sales of ultra-luxury cars by domestic automobile manufacturers is:

Tax payable = sales revenue x (tax rate at production stage + 10%)