Seoul and 15 other local governments call for VAT exemption for eco-friendly buses to remain in place

[Financial News] The Seoul Metropolitan Government is joining 15 other local governments nationwide in a coordinated response opposing the government’s push to end early the special VAT exemption for eco-friendly buses. The move comes amid concern that, if the government’s amendment passes, each electric bus will cost about 35 million won more from next year, potentially disrupting the shift to eco-friendly buses. The Seoul Metropolitan Government said on the 5th that it would join 15 other local governments nationwide in calling for the special VAT exemption for eco-friendly city and village buses to remain in place.
Under the current Restriction of Special Taxation Act, the VAT exemption for eco-friendly city and village buses, including electric and hydrogen-powered buses, applies through December 31, 2028. The government, however, is pursuing a tax overhaul that would end the special measure early, at the end of 2026, and the relevant bill is pending in the National Assembly. If the amendment passes, eco-friendly buses delivered on or after January 1, 2027, will be charged VAT equal to 10% of their purchase price. Based on an average electric bus price of 350 million won, this would mean an additional cost of about 35 million won per bus.
Local governments say that, with production of compressed natural gas (CNG) buses expected to stop from next year, cutting tax benefits as well could increase the burden on transport operators replacing their vehicles. Operators of village buses and other services with limited financial resources may also postpone vehicle replacements or keep aging vehicles in service for longer.
According to the Seoul Metropolitan Government and others, local governments nationwide are set to replace about 3,500 buses this year, and at least 4,000 buses are expected to be affected by the reduction in tax benefits next year. The resulting additional annual burden nationwide is estimated at about 139.8 billion won.
In Seoul, the number of buses slated for replacement will rise 26.7%, from 585 this year to 741 next year. It is expected to increase further to 1,256 by 2030. Applying an additional 35 million won per bus to next year’s planned replacements, Seoul alone could face about 25.9 billion won in extra costs.
The Seoul Metropolitan Government and 15 other local governments nationwide have therefore agreed to jointly urge the government and the National Assembly to halt efforts to amend the Restriction of Special Taxation Act, retain the current VAT exemption, and expand national government subsidies for eco-friendly low-floor buses.
Yeo Jang-kwon, head of the Seoul Metropolitan Government’s Transportation Office, said, “As the shift to eco-friendly buses is a key policy directly linked to citizens’ quality of life, sustained attention and institutional support from the central government are essential,” adding, “We will continue to work in concert with local governments to ensure citizens’ reliable access to transportation and build a sustainable public transport system.”

[email protected] Seong Cho-rong Reporter