Gasoline-fueled cars and hybrid vehicles (HVs) with fuel efficiency ratings that fall below 60% of new standards will be excluded from eco-car tax breaks in tax revisions for 2021 being formulated by the government and ruling parties.
An outline of the tax reforms was to be approved on Thursday.
From May 2021, new tax breaks for environmentally-friendly vehicles will be available for electric vehicles, plug-in hybrids, fuel-cell-powered vehicles, and natural gas vehicles.
The availability of tax breaks for gasoline-powered cars and HVs will depend on how their fuel efficiency compares to fiscal 2030 standard targets.
Tax breaks will not be available for vehicles rated at less than 60% of the new standard, while vehicles that exceed the new standard by 20% or more will be exempted from tonnage tax for the first and second mandatory vehicle inspections.
Higher tax break rates will be available for vehicles with higher fuel efficiency ratings under the new standards.
The government and ruling parties expect about 70% of new vehicle sales to be eligible for the new tax incentives.
Taxes for "clean diesel" vehicles, which are currently exempted from vehicle tonnage tax, will be the same as for gasoline vehicles from fiscal 2023.
To mitigate the impact on sales in the interim, the tax exemption for clean diesel vehicles will be limited to the first legally mandated inspections. The tax exemption will be available until April 2023 for clean diesel vehicles that meet 2020 fuel efficiency standards and until April 2022 for those that do not.
The new rules are aimed at accelerating the spread of vehicles that do not emit carbon dioxide, in light of Prime Minister Yoshihide Suga's target of reducing greenhouse gas emissions to net zero by 2050.
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