China’s 2025 VAT Rebate Policy: Key Industry Changes and Business Implications

China updated its VAT rebate policy effective September 2025, reducing eligibility for most industries.
Only manufacturing, research, IT services, and ecological protection industries retain full VAT refunds.
Other sectors face partial refunds and must reassess tax strategies.
The State Tax Administration and Ministry of Finance issued the notice to adjust tax incentives and increase fiscal revenue.
VAT credits are the excess of input VAT over output VAT, usually carried forward to offset future tax liabilities.
The rebate policy allows certain companies to convert unused credits into cash refunds, improving liquidity.
The change narrows the industries eligible for VAT credit rebates, initially broadened in 2022 during the COVID-19 pandemic.
Companies relying on VAT credit refunds should reassess the impact on cash flow and consider strategies like adjusting investments or exploring alternative financing.
The four industries eligible for full refunds are manufacturing, scientific research and technical services, software and IT services, and ecological protection and environmental management.
Real estate developers and operators face lower refundable proportions than previously allowed.

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.