Lawmakers expand tax incentives for vehicle scrapping to new purchases

Taipei, Aug. 29 (CNA) Lawmakers on Friday passed a Commodity Tax Act amendment called for by local auto companies that extends an existing tax deduction encouraging the scrapping of old vehicles for new ones and expands the incentives to new purchases.

The amendment was passed to extend the NT$50,000 (US$1,635.55) tax deduction on new purchase of sedans, mini trucks and light passenger-cargo dual-purpose cars -- such as pickups -- for scrapping under Article 12-5 of the Commodity Tax Act to Dec. 31, 2030.

The NT$4,000 tax deduction available when scrapping an old motorcycle for a new one was also extended to beyond Jan. 7, 2026, originally stipulated in the act.

The newly amended law will also offer the NT$50,000 tax deduction on new purchases of passenger sedans that have an engine with a cylinder volume of 2,000 cc or less, and NT$2,000 on new purchases of 150cc motorcycles.

This means a car owner who scraps his vehicle and buys a new passenger sedan with the required engine capacity will enjoy the existing NT$50,000 tax deduction on top of the NT$50,000 deduction soon to be introduced for the new purchase stipulated in the amended law.

During a legislative committee review of the proposed amendment on Aug. 21, Deputy Minister of Economic Affairs Ho Chin-tsang (何晉滄) told lawmakers the expanded tax deduction is expected to help first-time buyers, with local auto makers looking forward to the swift passage of the bill.

Meanwhile, Finance Minister Chuang Tsui-yun (莊翠雲) told lawmakers the bill meets public expectation, and will encourage purchases of more energy-efficient vehicles.

Commodity tax is a major cost in buying a new vehicle in Taiwan, whether it is domestically manufactured or imported, with the tax rates for passenger sedans set from 25-30 percent.

In a statement released Aug. 21, the Ministry of Finance said the number of electric vehicles sold in Taiwan has risen from 1 percent of all new registered cars in 2020 to 7.7 percent (35,406 cars) in 2024, thanks to the commodity tax exemption over the past decade.