China VAT Updates – July 2025

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

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