- The new VAT law in China will take effect on 1 January 2026, modernizing the tax system and aligning with global standards.
- VAT accounted for nearly 38 percent of China’s tax revenue in 2023, impacting local and international businesses.
- The law maintains a three-tier tax rate structure: 13 percent for general goods and imports, 9 percent for essential services, and 6 percent for modern service sectors.
- It provides clearer definitions of taxable transactions, including goods, services, intangible assets, real estate, and imports.
- The place-of-consumption principle is adopted for cross-border tax jurisdiction, focusing on where consumption occurs.
- Clear rules are set for cross-border transactions, requiring VAT compliance for overseas providers, especially in digital services.
- Companies should review contracts and invoicing to ensure compliance by 1 January 2026.
- Financial services are defined as taxable, with jurisdiction based on issuance or seller registration.
- Sales revenue now includes non-cash benefits, with market value guiding taxation.
- Administrative updates simplify compliance by aligning import tax declarations with customs timelines.
- The removal of the fallback clause limits authorities’ discretion, making tax rules more predictable.
- Further details on refund procedures and input VAT rules will be clarified before 2026.
Source: global.ecovis.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.
