- Implementation and Impact: The new VAT law, set to take effect on January 1, 2026, modernizes China’s tax system to align more closely with global standards, significantly affecting local and international businesses. VAT accounted for approximately CNY 6.9 trillion, or 38% of China’s total tax revenue in 2023.
- Clearer Tax Structure and Definitions: The law maintains a three-tier tax rate structure (13%, 9%, and 6%) while enhancing legal clarity by codifying statutory regulations. It also provides clearer definitions of taxable transactions, including goods, services, and intangible assets, and adopts a place-of-consumption principle for determining cross-border tax jurisdiction.
- Administrative Simplifications and Compliance: The new law streamlines compliance by removing ultra-short filing periods and aligning import tax declarations with customs timelines. It broadens the definition of taxable sales to include non-cash benefits and mandates businesses to review contracts and invoicing practices in preparation for the changes.
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.
