On December 25, 2024, China's Standing Committee of the 14th National People’s Congress passed the Value-Added Tax (VAT) Law, set to take effect on January 1, 2026. This marks a significant milestone in China's fiscal policy evolution, reinforcing the principle of statutory taxation while addressing the complex needs of businesses and consumers alike.
China Passes New VAT Law: Is Fiscalization Next?
Public
Other countries
Author: Darko Pavic
Category:
Fiscal subject related
General information
Views:
865
Content accuracy validation date:
26.12.2024
Content accuracy validation time:
09:28h
The Importance of VAT in China
VAT stands as the largest tax category in China, contributing nearly 38% of the country’s total national tax revenue. In 2023 alone, VAT revenue reached an impressive RMB 6.9 trillion. With over 60 million VAT taxpayers and its application across goods, services, and real estate, VAT impacts virtually every segment of China's economy.
Evolution of China’s VAT Framework
China's VAT system was first introduced in 1994 through interim regulations. Over the years, it has undergone significant reforms, including the notable replacement of the business tax with VAT, broadening its application. The journey toward codifying the VAT system began with a draft VAT Law open for public consultation in 2022, culminating in its approval after three legislative readings in 2024.
Key Features of the New VAT Law
While the full text of the law is not yet released, its framework maintains existing VAT rates and structures, ensuring stability for taxpayers. Exemptions are expected to include agricultural products, scientific research equipment, and services provided by welfare institutions. These provisions aim to balance fiscal revenue needs with socio-economic priorities.
Implications for Businesses and the Economy
The VAT Law's implementation aligns with China’s broader economic strategies, including efforts to revitalize its slowing economy. Notably, VAT revenue in the first 11 months of 2024 dropped 4.7% year-over-year, reflecting weak domestic demand. However, a 1.36% rebound in November VAT revenue suggests a recovery in business activity and industrial profits.
For businesses, the new VAT Law presents both challenges and opportunities. Transitioning to the updated legal framework will require careful preparation, particularly for VAT compliance. Policymakers are expected to provide detailed guidelines and support measures to ensure a smooth shift for businesses of all sizes.
The Bigger Picture
With this new legislation, China now has dedicated laws for 14 of its 18 tax categories, covering the majority of national tax revenue. This progress demonstrates China's commitment to modernizing its fiscal governance and aligning with global best practices.
What’s Next?
As the details of the VAT Law unfold, businesses and fiscal solution providers must closely monitor developments to adapt efficiently. For international retailers and global companies operating in China, partnering with experts in fiscal compliance will be critical.
At Fiscal Solutions, we specialize in helping businesses navigate complex tax systems worldwide. Our middleware and expertise are designed to simplify fiscal compliance, offering seamless integration into your POS systems. As the 2026 deadline approaches, we’re ready to help you align with China’s new VAT Law while minimizing operational disruptions.
Is fiscalization the next step?
Feel free to share your thoughts or questions about China’s VAT reforms in the comments below! Let’s discuss how this new legislation might shape the future of business in one of the world’s largest economies.
Other news from Other countries
South Africa Proposes Major VAT Reforms to Modernize Tax System
Public
Other countries
Author: Ljubica Blagojević
Other countries
Author: Ljubica Blagojević
South Africa’s 2025 draft TLAB and TALAB propose major VAT reforms to modernise the system and close compliance gaps. Key changes include extending intermediary rules to local suppliers, zero-rating silver exports and clinical trial services, exempting all basic education supplies (forcing some schools to deregister), removing low-value import thresholds, and tightening VAT registration with site... Read more
South Africa Releases VAT Draft to Advance E-Invoicing and Digital Reporting
Public
Other countries
Author: Ljubica Blagojević
Other countries
Author: Ljubica Blagojević
South Africa's National Treasury and Revenue Service introduces e-invoicing, e-reporting, and an interoperability framework to modernize the VAT system. On August 16, 2025, South Africa’s National Treasury and Revenue Service released a draft amending the VAT Law, introducing definitions for e-invoicing, e-reporting, and an interoperability framework to modernize the VAT system. E-invoicing... Read more
New Zealand’s e-Invoicing Mandate: A Concise Overview
Public
Other countries
Author: Ema Stamenković
Other countries
Author: Ema Stamenković
New Zealand is transitioning to e-invoicing as a standard, driven by the global Peppol Network and the regional PINT A-NZ specification. The Ministry of Business, Innovation and Employment (MBIE) oversees the adoption, with central public agencies required to receive e-invoices since March 2022. From January 2026, agencies processing over 2,000 domestic invoices annually must send and receive e-in... Read more
Malaysia Introduces 2025 Tax Reforms: E-Invoicing Rollout
Public
Other countries
Author: Ljubica Blagojević
Other countries
Author: Ljubica Blagojević
Malaysia's tax authority has introduced new tax measures and compliance requirements for 2025, including mandatory e-invoicing for taxpayers with annual income between 5 and 25 million ringgits, increased support for MSMEs, and a new tax handling branch. On August 22, the Malaysian Tax Authority published e-Bulletin No. 4/2025, which detailed a number of new tax laws and compliance standards for 2... Read more
Indonesia Reforms Digital Tax Collection for E-commerce
Public
Other countries
Author: Ljubica Blagojević
Other countries
Author: Ljubica Blagojević
Between May and July 2025, Indonesia introduced major reforms to strengthen e-commerce and digital tax collection. PERPRES-68/2025 creates a state-backed system to collect VAT on overseas digital sales, PMK-37/2025 appoints qualifying domestic and foreign platforms (PPMSE) as Article 22 income tax collectors with a 0.5% withholding on sellers’ revenue, and PER-12/2025 tightens VAT reporting and re... Read more
Colombia 2026 Tax Reform Proposal
Public
Other countries
Author: Ema Stamenković
Other countries
Author: Ema Stamenković
Colombia's Ministry of Finance proposes tax reforms for 2026 budget, aiming to raise COP 26.3 trillion, including reduced VAT rates for hybrid vehicles, increased financial sector surcharges, and reduced personal income tax. On September 1, 2025, Colombia’s Ministry of Finance submitted a tax reform bill to Congress for the 2026 budget, aiming to raise COP 26.3 trillion. The bill reforms VAT... Read more
China VAT Rebate Policy Update 2025
Public
Other countries
Author: Ljubica Blagojević
Other countries
Author: Ljubica Blagojević
China's State Tax Administration and Ministry of Finance have revised the VAT credit rebate policy to boost fiscal revenue. The policy now allows full refunds for four key industries: manufacturing, scientific research and technical services, software and IT services, and ecological protection and environmental management. Other sectors, including real estate, face partial refunds, requiring busin... Read more