- China’s National People’s Congress passed a comprehensive VAT law set to take effect on 1 January 2026
- This marks the first comprehensive VAT legislation in China, building on initial regulations introduced in the early 1990s
- The law aims to modernize the VAT system, align it with international standards, and consolidate existing rules into a single legislation
- The structure and framework of the existing VAT system are maintained, but the law revises some rules
- The law clearly defines taxable transactions and updates guidelines for nonresident enterprises operating in China
- New exemptions have been added and some previous exemptions removed
- The law consists of six chapters and 38 articles
- Taxable transactions include sales of goods, real estate, financial commodities, and services or intangible assets based on specific conditions related to their location or consumption in China
- Transactions involving self-produced goods for personal use or goods transferred without consideration are also taxable
- Different tax rates apply based on the main business of the transaction; separate accounting is required for transactions with different rates, otherwise, the higher rate applies
- Non-deductible input VAT includes taxes on items under simplified tax methods, exempt items, and goods used for personal consumption among others
- The law lists supplies exempt from VAT and delegates the standards for these exemptions to the State Council
Source: bdo.global
Note that this post was (partially) written with the help of AI. It is always useful to review the original source material, and where needed to obtain (local) advice from a specialist.
