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:
3784
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
UAE Launches Optional B2B Peppol 4‑Corner E‑Invoicing
Public
Other countries
Author: Ema Stamenković
Other countries
Author: Ema Stamenković
The UAE launched an optional B2B 4-corner Peppol e-invoicing framework, allowing suppliers and buyers to exchange structured invoices via Accredited Service Providers. This model precedes the mandatory 5-corner system in 2027, integrating the Federal Tax Authority. Businesses must comply with Peppol standards via the EmaraTax platform, ensuring early adoption for smoother transitions and complianc... Read more
Chile Extends Deadline for Dispatch Guide and E‑Invoice Requirements
Public
Other countries
Author: Ema Stamenković
Other countries
Author: Ema Stamenković
Chile's tax office postponed the implementation of new dispatch guidelines and invoice regulations to November 1, 2026, giving companies additional time for compliance preparation. The introduction of new regulations for dispatch guidelines and invoices used in the transfer of goods has been postponed by Chile's tax office. Exempt Resolution No. 52, announced by the Servicio de Impuestos Internos... Read more
ZATCA E‑Invoicing Rules in Saudi Arabia Explained
Public
Other countries
Author: Ema Stamenković
Other countries
Author: Ema Stamenković
Saudi Arabia’s ZATCA is mandating e-invoicing via its Fatoora platform to enhance transparency. Phase 1, completed in December 2021, introduced electronic invoicing. Phase 2, rolling out, includes B2B/B2G validations and B2C tax reporting. Saudi Arabia is progressively rolling out mandatory e-invoicing and e-reporting requirements for all businesses, led by the Zakat, Tax and Customs Authority (ZA... Read more
UAE E-Invoicing: Legal Framework and Implementation (Updated 2026)
Public
Other countries
Author: Ema Stamenković
Other countries
Author: Ema Stamenković
The UAE Ministry of Finance issued Ministerial Decision Nos. 243 and 244 of 2025, establishing a national e-invoicing system with a phased implementation. Detailed guidelines and regulations followed, outlining penalties for noncompliance. The e-invoicing regime applies to all business transactions in the UAE, with exceptions for specific entities. The implementation timeline consists of pilot, vo... Read more
Vietnam Clarifies VAT for Foreign Digital Service Providers
Public
Other countries
Author: Ema Stamenković
Other countries
Author: Ema Stamenković
Foreign businesses in Vietnam face a 10% VAT on cross-border transactions, impacting pricing and profitability. Services consumed locally are taxed, complicating revenue recognition. Compliance must start before revenue generation, with B2C VAT directly affecting demand and cost structures. Foreign businesses entering Vietnam must treat VAT as a structural pricing constraint from the start, since... Read more
Vietnam: Finance Ministry Simplifies E‑Invoicing for E‑Commerce and Low‑Value Deals
Public
Other countries
Author: Ema Stamenković
Other countries
Author: Ema Stamenković
Vietnam's Ministry of Finance's draft decree aims to simplify e-invoicing for e-commerce and low-value transactions by involving platform operators for specific sellers. Small businesses can issue daily consolidated invoices, while services like finance may use bulk invoicing. New regulations on VAT, formats, and compliance are outlined. Vietnam’s Ministry of Finance has issued a draft decre... Read more
Electronic Export Invoice (DTE) in Chile
Public
Other countries
Author: Ema Stamenković
Other countries
Author: Ema Stamenković
To export goods or services from Chile, issue an Electronic Export Invoice (DTE) to comply with SII regulations. This document includes exporter and importer details, product/service descriptions, quantities, values, and transport conditions, justifying the transaction to Customs. Register as an exporter with the SII by submitting Form 3230 and receiving authorization. When issuing an invoice, sel... Read more