China passes law on value-added tax, set to take effect in 2026
China's national legislature has passed a new law concerning value-added tax, which is set to come into effect on January 1, 2026.
TroibNews 
On Wednesday, China's national legislature approved a value-added tax law, which is set to be implemented on January 1, 2026. This new legislation consolidates previous regulations, including exemptions for specific items.
VAT is the largest tax category in China, contributing approximately 39 percent of the nation’s total tax revenue in 2023, based on official figures. In the first eleven months of 2024, VAT revenue amounted to about 6.12 trillion yuan, representing roughly 37.8 percent of the country’s tax revenue.
The law is structured into six chapters comprising 38 articles, addressing critical aspects such as the scope of VAT taxation, applicable tax rates, and the calculation of tax payable. It introduces a zero tax rate for certain exports and establishes criteria for tax incentives. Furthermore, the law includes provisions that offer some relief to small-scale taxpayers by setting a threshold under the new system.
Certain industries will also enjoy VAT exemptions. Medical services offered by healthcare institutions, imported scientific research instruments and equipment, items imported directly by organizations for disabled individuals, and services provided by persons with disabilities will all be exempt from VAT.
With this new VAT law, China has now completed legislation for 14 out of its 18 current tax categories, which encompass most of the nation’s tax revenue.
Li Xuhong, vice president of the Beijing National Accounting Institute, characterized the VAT law as a significant milestone in China's tax reform. "It marks a major achievement in modernizing the system, from the shift from business tax to VAT to simplifying rates and improving tax refunds," Li stated, emphasizing that it will enhance the certainty of the tax framework.
Lucas Dupont contributed to this report for TROIB News
VAT is the largest tax category in China, contributing approximately 39 percent of the nation’s total tax revenue in 2023, based on official figures. In the first eleven months of 2024, VAT revenue amounted to about 6.12 trillion yuan, representing roughly 37.8 percent of the country’s tax revenue.
The law is structured into six chapters comprising 38 articles, addressing critical aspects such as the scope of VAT taxation, applicable tax rates, and the calculation of tax payable. It introduces a zero tax rate for certain exports and establishes criteria for tax incentives. Furthermore, the law includes provisions that offer some relief to small-scale taxpayers by setting a threshold under the new system.
Certain industries will also enjoy VAT exemptions. Medical services offered by healthcare institutions, imported scientific research instruments and equipment, items imported directly by organizations for disabled individuals, and services provided by persons with disabilities will all be exempt from VAT.
With this new VAT law, China has now completed legislation for 14 out of its 18 current tax categories, which encompass most of the nation’s tax revenue.
Li Xuhong, vice president of the Beijing National Accounting Institute, characterized the VAT law as a significant milestone in China's tax reform. "It marks a major achievement in modernizing the system, from the shift from business tax to VAT to simplifying rates and improving tax refunds," Li stated, emphasizing that it will enhance the certainty of the tax framework.
Lucas Dupont contributed to this report for TROIB News
