China Enacts VAT Law, Enhancing Law-Based Taxation System

• China passes a new law on value-added tax set to take effect on January 1, 2026
• The law was approved by the Standing Committee of the National People’s Congress
• This law brings the total to 14 out of 18 tax categories in China now governed by their own laws
• The VAT law aims to improve the socialist rule of law with Chinese characteristics and stabilize market expectations
• VAT is the largest tax category in China, making up about 38 percent of the national tax revenue in 2023
• The law includes VAT exemptions for small-scale taxpayers and certain goods and services like agricultural products and educational equipment
• The transition to the new VAT law is expected to boost economic development and improve the tax business environment
• Recent VAT reforms include rate reductions and extended exemptions to support sectors like manufacturing and small businesses
• Additional tax policies have been introduced to aid the real estate market, including VAT exemptions on home sales after two years of ownership

Source: chinatax.gov.cn

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.

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