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:
795
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
Indonesia Clarifies E-commerce VAT
Public
Other countries
Author: Ljubica Blagojević
Other countries
Author: Ljubica Blagojević
In Indonesia, online marketplaces facilitating cross-border digital sales may be required to charge and remit VAT, though the law is unclear on which platforms this applies to. Marketplaces must also report all vendor transactions to the tax authorities. These rules aim to strengthen VAT collection and increase transparency for digital sales to Indonesian consumers. A marketplace operator is defin... Read more
Qatar's Tax System: VAT & Electronic Invoicing
Public
Other countries
Author: Ema Stamenković
Other countries
Author: Ema Stamenković
Qatar is implementing a modern, transparent, and digitized tax system to align with a globalized economy. Main reforms include strengthening the General Tax Authority, preparing for a 5% VAT under the GCC VAT Framework Agreement, and exploring electronic invoicing. Qatar is shifting toward a modern, transparent, and digitized tax system to align with a globalized, less hydrocarbon-dependent econom... Read more
VAT & Promotions: Understanding Vouchers, Gifts, and Discounts in the UK
Public
Other countries
Author: Ema Stamenković
Other countries
Author: Ema Stamenković
VAT treatment for business promotions is complex due to changes in EU and domestic legislation and case law. The main points are whether there is a supply and, if so, what the value of that supply is. The UK rules for face value vouchers (FVV) have been altered, with VAT due on the value of the voucher when issued. Single-purpose vouchers carry the right to receive only one type of goods or servic... Read more
Latvia Moves Towards Mandatory E-Invoicing: Consultation Now Open
Public
Other countries
Author: Ema Stamenković
Other countries
Author: Ema Stamenković
The Latvian Cabinet is launching a public consultation on a draft regulation for mandatory electronic invoicing, outlining technical standards, transmission channels, and compliance timelines, with voluntary participation allowed for B2B transactions. A public consultation on a draft regulation outlining the steps for enforcing mandatory electronic invoicing in Latvia was launched by the Latvian C... Read more
USA: New York Passes Law Requiring Stores to Accept Cash
Public
Other countries
Author: Ivana Picajkić
Other countries
Author: Ivana Picajkić
New York has passed a law requiring stores to accept cash, banning retailers from refusing it as payment. The aim is to protect access to basic goods for low-income, elderly, and unbanked residents in an increasingly cashless economy. The bill now awaits the governor’s signature. New York has passed a new law that requires stores to accept cash. The bill, approved by both chambers of the state leg... Read more
Malaysia Adopts PINT-MY Billing for E-Invoicing
Public
Other countries
Author: Ljubica Blagojević
Other countries
Author: Ljubica Blagojević
The PINT-MY Billing Specification is Malaysia’s version of the Peppol e-invoice, adapted for SST and based on the UBL 2.1 XML format. It sets guidelines for B2B and B2G invoicing via the MyInvois platform, supporting automation and tax compliance. It includes defined business roles, main invoice fields, and tax tagging for SST (Sales and Service Tax), TTx (Tourism Tax), LVG (Low-Value Goods), and... Read more
Latvia: B2B E-Invoicing Mandate: New Timelines Approved
Public
Other countries
Author: Ema Stamenković
Other countries
Author: Ema Stamenković
The Latvian Parliament adopted a revised draft law, No. 967/Lp14, setting new deadlines for mandatory e-invoice data reporting, domestic B2B transactions, and voluntary e-invoicing for small businesses. On June 5, 2025, the Budget and Finance (Tax) Committee rejected a proposal (Amendments to the Accounting Law No. 927/Lp14) to delay the B2B e-invoice mandate to January 1, 2027. Instead, a revised... Read more