1. VAT Reimposition on Bond Interest Income
- Effective 8 August 2025, VAT will apply to interest income from:
- Newly issued government bonds
- Local government bonds
- Financial bonds
- Bonds issued before this date remain VAT-exempt until maturity.
- Financial institutions must distinguish between new and existing/reissued bonds to ensure compliance.
2. VAT Law Modernization
- A new comprehensive VAT law will take effect on 1 January 2026, aligning China’s system more closely with OECD VAT Guidelines.
- This reform aims to modernize compliance and reduce inconsistencies across sectors.
3. Consumption Tax Adjustment (Indirect VAT Impact)
- The Ministry of Finance and State Taxation Administration announced optimized consumption tax policies for ultra-luxury passenger cars.
- While not a direct VAT change, this affects indirect tax burdens and pricing structures for high-end automotive import.
Source China-briefing
