China to end tax breaks on certain PV cells, battery products

Phased tax restoration, exemptions for new technologies

For PV cells, a 2% rate will take effect on 1 April 2027, increasing to 4% from 1 April 2028.

The announcement also details three key policy changes on the battery consumption tax. From 1 September 2026, a 2% tax rate will apply to mercury-free primary batteries, nickel-metal hydride batteries (also known as nickel-hydrogen or Ni-MH batteries), primary lithium batteries, lithium-ion batteries and all-vanadium redox flow batteries, rising to 4% starting from 1 September 2027.

Meanwhile, targeted exemptions remain in place through 31 December 2028, covering sodium-ion batteries, solid-state batteries, fuel cells, and perovskite, tandem and gallium arsenide PV cells.

The core of the policy shift is the resumption of a consumption tax on previously exempt battery products, with a clearly defined transition period. PV cells, power batteries and stationary storage batteries will be gradually brought into the tax regime over the next two years, kicking off at 50% of the full statutory rate.

Ge Yuyu, associate professor at Shanghai National Accounting Institute, noted that the standard consumption tax rate for batteries is 4%. PV cells and other clean energy batteries were previously granted exemptions to encourage development. However, changes in socioeconomic conditions, industrial progress and environmental governance have prompted refinements to these incentives, paving the way for a phased reinstatement across battery categories.

Notably, the authorities have avoided a blanket rollback. Emerging technologies—including perovskite, tandem and gallium arsenide PV cells—will continue to enjoy exemptions from 1 September 2026, through 31 December 2028, sustaining fiscal support for innovation.

Shi Zhengwen, director of the Fiscal and Tax Law Research Centre of the China University of Political Science and Law, noted that the policy takes full account of business operations and supply chain stability. The staggered timeline and tiered rates help cushion industry shocks, allowing businesses to absorb costs and adjust operations smoothly. The deliberate postponement of tax resumption on PV cells, for instance, gives the sector—now steadily recovering from intense vicious competition—more time to adapt.

Why was this policy adjustment rolled out?

In February 2015, to promote energy conservation and environmental protection, China’s Ministry of Finance, the State Taxation Administration and other authorities introduced a policy bringing batteries under a consumption tax, levied at 4% on production, commissioned processing and imports. Exemptions were granted to mercury-free primary batteries, nickel-metal hydride batteries (also known as nickel-hydrogen or Ni-MH batteries), primary lithium batteries, lithium-ion batteries, PV cells, fuel cells and all-vanadium redox flow batteries.

Since the exemption was implement, China’s battery and PV industries have flourished: today, China leads the world in both battery capacity and supply chain completeness, while over the decade to 2025, PV module prices fell from roughly RMB4/watt to just RMB0.6/watt (US$0.59-0.08), with their share of total power plant investment dropping from 50-60% to 20-25%. Solar power’s levelised cost has dipped below that of coal-fired generation.

“This shift in the industry landscape provides the rationale for resuming taxation,” Ge Yuyu added. “Technological advances have given these products strong cost competitiveness and global supply capacity, so reinstating the tax will not impede growth. Moreover, it aligns with the regulatory purpose of the consumption tax—imposing it once products reach maturity and mass supply. The phased withdrawal of preferential treatment aligns with the underlying industrial rationale and the original intent behind the tax incentives.”

Experts noted that the differentiated, phased approach balances short-term stability with long-term development. It sends a clear signal encouraging innovation and industrial upgrading while phasing out low-end capacity, helping curb cutthroat competition and fostering healthy, high-quality growth.

The reintroduction of the consumption tax follows the issuance of new mandatory national standards for China’s PV industry covering energy consumption and efficiency across the PV value chain, from polysilicon and monocrystalline silicon to PV modules and inverters. The new rules, which will take effect nationwide on 1 January 2027, were heralded as a move by authorities to help tackle the acute oversupply situation in China’s PV module industry.