China’s New VAT Law: Minimal Impact on Businesses Despite Major Legislation

• China approved its first value-added tax law which will take effect on January 1, 2026
• The new VAT law is expected to have a limited impact on businesses according to tax specialist Wang Huayu
• The law maintains the existing VAT rates of 6 percent, 9 percent, and 13 percent
• It specifies taxable transactions directly, a task previously managed by the State Council
• VAT is the largest source of tax revenue in China, accounting for about 38 percent of total government income
• The VAT law consists of six chapters and 38 articles, expanding on the previous regulations by 10 articles
• The law exempts nine areas from VAT including some agricultural production, medical services, and education
• Special VAT policies may be formulated by the State Council to support various sectors and activities
• Managing VAT is challenging due to its wide scope and long collection chain
• The law includes provisions to enhance tax governance, such as recognizing electronic invoices as legally equivalent to paper ones

Source: yicaiglobal.com

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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