China’s VAT regulations, in place for 31 years, will be replaced by a new VAT Law on January 1, 2026, marking a significant shift in the country’s tax system. On December 25, 2024, China’s legislature passed the Value-Added Tax Law, replacing the Interim VAT Regulations. The State Council is expected to issue Implementing Regulations to provide further guidance.
China's VAT Law: Main Changes & Implications for Tax Professionals
Public
Other countries
Author: Ivana Picajkić
Category:
Fiscal subject related
Views:
3193
Content accuracy validation date:
04.02.2025
Content accuracy validation time:
09:09h
The new VAT law aims to improve tax efficiency, promote economic growth, and ensure fair tax collection while protecting taxpayer rights. It applies to all entities and individuals selling goods, services, intangible assets, real estate, or importing goods in China, with exceptions such as wages, government fees, compensation for expropriations, and deposit interest. As an extra-price tax, VAT must be itemized separately on invoices.
Generally, taxpayers can offset input tax against their VAT liability. Small-scale taxpayers, those with annual VAT sales under 5 million yuan (approximately USD 6.97 million), follow simplified tax calculations unless they choose the general taxation method.
Six main changes in the VAT Law are as following:
- Standardizing Taxable Transactions – VAT now applies to four main categories: goods, services, intangible assets, and real estate, eliminating “labor services” to reduce confusion,
- Simplifying Deemed Sales Rules – Free services are no longer deemed taxable, addressing enforcement and taxpayer burden issues,
- Adjusting Input Tax Deductions – Loan services are no longer listed as non-deductible, easing the VAT burden for inter-enterprise loans,
- Unifying Simplified Tax Rate – The law fixes the simplified tax rate at 3%, but the future of the 5% tax rate remains uncertain,
- Expanding Tax Authority’s Adjustment Powers – Authorities can adjust taxable sales values if deemed significantly too high or low to prevent tax avoidance,
- Legalizing Input Tax Refunds – Taxpayers can carry forward excess input VAT or apply for refunds, formalizing prior reforms.
The VAT system applies different tax rates based on transaction type:
- 13% for goods sales, tangible property leasing, and imports (default rate),
- 9% for services such as transportation, basic telecommunications, real estate, and select goods like agricultural products and utilities,
- 6% for general services and intangible assets not specifically categorized,
- 0% for exports and designated cross-border services.
For simplified taxation, a 3% collection rate is used. Taxpayers handling multiple transactions with different rates must keep separate records; otherwise, the highest rate will apply.
To support key industries and activities, the VAT law grants exemptions for:
- Sales of self-produced agricultural products by producers,
- Medical services provided by healthcare institutions,
- Sales of used goods by individuals,
- Imports of certain scientific equipment and public welfare items,
- Services related to education, marriage, funerals, and cultural or religious activities.
Small-scale taxpayers below a set revenue threshold are fully exempt from VAT. The State Council has the authority to introduce or modify tax incentives for national priorities like small businesses, innovation, and public welfare contributions. Taxpayers who decline these incentives may be restricted from reapplying for up to 36 months.
There are five main issues to watch for when implementing the new regulation:
- Defining “Primary Business” in mixed sales transactions,
- Scope of Zero-Rated VAT for cross-border services,
- Clarifications on Deductible Input VAT and deduction certificate requirements,
- Standardization of VAT Refund Processes across regions,
- Details of Special VAT Preferential Policies for small businesses and key industries.
With the new VAT Law taking effect in less than a year, businesses should monitor upcoming regulations and prepare accordingly.
Other news from Other countries
Chile Reminder: Deadline Approaching for Document Printing Issues: March 1, 2026
Public
Other countries
Author: Ema Stamenković
Other countries
Author: Ema Stamenković
The deadline to print required documents is March 1st, 2026. Resolution No. 12 mandates companies to provide printed electronic invoices and receipts, effective May 1st, 2025, alongside digital transmission options. The deadline for anyone who is unable to print the required documents due to a lack of equipment or an unconfigured system is March 1st, 2026. The resolution No.12 that was published o... Read more
China Implements New VAT Law Regulations
Public
Other countries
Author: Ljubica Blagojević
Other countries
Author: Ljubica Blagojević
China’s VAT implementation regulations, effective 1 January 2026, replace the provisional VAT rules and introduce tighter VAT scope and input VAT credit rules, including annual reconciliation for long-term assets over RMB 5 million (approx. €605,404). While VAT rates remain unchanged, compliance complexity increases, and businesses should reassess VAT positions and controls ahead of implementation... Read more
Colombia Approves Temporary 2026 Tax Hikes on Alcohol, Tobacco, and Imports
Public
Other countries
Author: Ema Stamenković
Other countries
Author: Ema Stamenković
The Colombian Government issued Decree 1474 due to an Economic Emergency, introducing temporary tax measures for 2026 to address a fiscal gap. VAT and excise tax increases apply to liquor, cigarettes, and certain vehicles. Equity tax threshold lowered and progressive rates increased. A special 1% tax on hydrocarbons/coal is extended, and a 19% normalization tax on undeclared assets initiates. Pena... Read more
UAE VAT Rates Overview
Public
Other countries
Author: Ema Stamenković
Other countries
Author: Ema Stamenković
UAE VAT is crucial for businesses, with a standard rate of 5% on most goods/services. Zero-rated supplies allow input VAT recovery, while exempt supplies incur hidden costs. Compliance and documentation are essential for strategic business insights. Value-Added Tax (VAT) is essential for businesses in the UAE. Understanding rates and compliance impacts your bottom line. Standard Rate: 5% Applies... Read more
Saudi Arabia Extends Tax Penalty Waiver to June 2026
Public
Other countries
Author: Ema Stamenković
Other countries
Author: Ema Stamenković
On 1 January 2025, Saudi Arabia extended ZATCA’s initiative to cancel penalties for taxpayers until June 2026. Eligible taxpayers must submit returns and pay dues, excluding evasion penalties and those already paid. On 1 January 2025, Saudi Arabia’s Minister of Finance approved a six-month extension of ZATCA’s Initiative to Cancel Fines and Exempt Taxpayers from Financial Penalties. Th... Read more
New Zealand E-Invoicing Overview
Public
Other countries
Author: Ema Stamenković
Other countries
Author: Ema Stamenković
New Zealand is rolling out e-invoicing in phases, emphasizing government procurement and using the Peppol framework. While adoption is voluntary for businesses, large suppliers will be mandated to send e-invoices by January 1, 2027. E-invoices must follow the Peppol BIS Billing 3.0 specification and include essential GST-related information. The focus is solely on domestic transactions, with no im... Read more
Malaysia Postpones Mandatory E-Invoicing to 2027
Public
Other countries
Author: Ljubica Blagojević
Other countries
Author: Ljubica Blagojević
Malaysia has delayed mandatory MyInvois e-invoicing for businesses with RM1m–RM5m (€190k – €980k) turnover to 1 January 2027, with an extended penalty-free transition, citing readiness and cost concerns. This follows the increase of the exemption threshold to RM1 million, which removes smaller businesses from the scope and cancels the RM500k–RM1m rollout. Larger taxpayers remain on the existing ti... Read more