China’s New VAT Law: Key Changes and Implications Starting January 2026

• On 25 December 2024, China’s National People’s Congress ratified the new Value Added Tax Law, which will be effective from 1 January 2026
• This new VAT law replaces the provisional VAT regulations that have been in effect for thirty years
• The new law changes the rules for the place of supply of services, now deemed to be in China if the service is consumed there or the provider is located there
• Domestic purchasers will generally act as VAT withholding agents for foreign sellers, unless a domestic agent is appointed by State Council regulations
• An exception in the withholding rule was added to the final law version to help tax authorities manage collections from multiple private Chinese buyers
• VAT-able transactions under the new law include the use of self-manufactured goods for personal consumption or employee welfare, providing goods or certain assets free of charge
• The provision of services free of charge, except financial products, is not considered a VAT-able transaction under the new law
• The State Council no longer has the authority to unilaterally add situations to the deemed sales rules; such additions must now be approved by NPC legislators
• Input VAT from loan interest is no longer listed as non-creditable, potentially allowing for more liberal crediting rules pending future regulations
• Mixed sales involve transactions with multiple elements subject to different VAT rates, but the text was cut off before further details were provided

Source: www2.deloitte.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.

---

---