China introduces regulations for the implementation of its inaugural VAT Act

Summary of State Council Decree No. 826: Regulations for the Implementation of the VAT Law of the People’s Republic of China

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China released detailed implementing regulations for its VAT law ahead of its January 1, 2026 rollout.

• The regulations, issued by the State Taxation Administration, include six chapters and 54 articles covering tax rates, taxable transactions, preferential policies, and tax administration.
• The rules aim to ensure a smooth implementation of the VAT law and promote fair competition and a unified national market.
• The regulations clarify legislative principles, strengthen taxpayer protections, and provide institutional support for the new VAT law.

Source: en.tmtpost.com

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Unofficial translation:

Citation mark: 000014349/2025-00101
Topic Classification: Finance, finance, audit/taxation
Issuing authority: State Council
Date of writing: December 25, 2025
Title: Regulations for the Implementation of the VAT Law of the People’s Republic of China
Issue number: State Decree No. 826
Release Date: December 30, 2025

Decree of the State Council of the People’s Republic of China

No. 826

The Regulations on the Implementation of the Value-Added Tax Law of the People’s Republic of China were passed at the 75th executive meeting of the State Council on December 19, 2025, and are hereby promulgated, coming into force on January 1, 2026.

Premier Li Qiang

December 25, 2025

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Regulations for the Implementation of the VAT Law of the People’s Republic of China

Chapter 1 General Provisions

Article 1 These Regulations are formulated in accordance with the Value-Added Tax Law of the People’s Republic of China (hereinafter referred to as the Value-Added Tax Law).

Article 2 The goods referred to in Article 3 of the VAT Law include tangible movable property, electricity, heat, gas, etc.

The services referred to in Article 3 of the VAT Law include transportation services, postal services, telecommunications services, construction services, financial services, as well as production and living services such as information technology services, cultural and sports services, and assurance consulting services.

The intangible assets referred to in Article 3 of the VAT Law are assets that do not have a physical form but can bring economic benefits, including technology, trademarks, copyrights, goodwill, natural resource use rights, and other intangible assets.

The real estate referred to in Article 3 of the VAT Law includes assets that cannot be moved or that will change in nature and shape after moving, including buildings and structures.

The competent departments of finance and taxation under the State Council shall propose the specific scope of goods, services, intangible assets, and real estate, and report to the State Council for approval before promulgating and implementing them.

Article 3 The units referred to in Article 3 of the VAT Law include enterprises, administrative organs, public institutions, military units, social organizations, and other units.

The term “individuals” as used in Article 3 of the VAT Law includes individual industrial and commercial households and natural persons.

Article 4 The consumption of services and intangible assets in China, as referred to in Item 4 of Article 4 of the VAT Law, includes the following situations:

(1) Sales of services and intangible assets by overseas units or individuals to domestic units or individuals, except for services consumed on-site overseas;

(2) Services and intangible assets sold by overseas units or individuals that are directly related to domestic goods, real estate, and natural resources;

(3) Other circumstances stipulated by the competent departments of finance and taxation under the State Council.

Article 5 When a taxpayer issues a special VAT invoice, it shall specify the sales amount and VAT separately.

Article 6 Taxpayers who apply the general taxation method are considered general taxpayers.

General taxpayers shall implement a registration system, and the specific registration methods shall be formulated by the tax department under the State Council.

Article 7 Natural persons are classified as small-scale taxpayers. Non-enterprise units that do not frequently have taxable transactions and whose main business does not fall within the scope of taxable transactions can choose to pay taxes according to small-scale taxpayer regulations.

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Chapter 2 Tax Rates

Article 8 The export goods referred to in Article 10, Item 4 of the VAT Law are those that have actually left the country and are sold to overseas entities or individuals in customs declarations, as well as the goods that are deemed to be exported as stipulated by the State Council.

Article 9 The tax rate for cross-border sales of the following services and intangible assets by domestic units or individuals is zero:

(1) R&D services, contract energy management services, design services, broadcasting, film and television production and distribution services, software services, circuit design and testing services, information system services, business process management services, and offshore service outsourcing businesses sold entirely for overseas consumption;

(2) Technology transferred to overseas units for use entirely abroad;

(3) International transportation services, aerospace transportation services, and external repair services.

Article 10 The taxable transactions referred to in Article 13 of the VAT Law must meet the following conditions simultaneously:

(1) They contain two or more businesses involving different tax rates and levy rates;

(2) There is an obvious relationship between businesses, with a main and subordinate relationship. The main business occupies the primary position, reflecting the essence and purpose of the transaction; the ancillary business is a necessary supplement to the main business and is premised on the occurrence of the main business.

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Chapter III Tax Payable

Article 11 The VAT deduction certificates referred to in Article 16 of the VAT Law must comply with the relevant provisions of the tax department under the State Council, including special VAT invoices, special payment certificates for import VAT from Customs, tax payment certificates, agricultural product purchase invoices, agricultural product sales invoices, and other tax deduction certificates with input tax deduction functions.

Article 12 The input tax deducted by taxpayers from the output tax with the VAT deduction certificate includes:

(1) The amount of VAT specified on the special VAT invoice obtained from the seller;

(2) The amount of VAT specified in the special payment form for import VAT obtained from Customs;

(3) The amount of VAT specified on the tax payment certificate obtained from the purchase of services, intangible assets, or domestic real estate by overseas entities or individuals;

(4) When purchasing agricultural products, except for obtaining special VAT invoices or customs import VAT special payment letters, the input tax calculated according to the purchase invoice of agricultural products or the sales invoice of agricultural products, unless otherwise stipulated by the State Council;

(5) The amount of VAT listed or included in other VAT deduction certificates obtained from the seller.

Article 13 If a taxpayer calculates and pays VAT in accordance with the general tax calculation method, the amount of VAT refunded to the buyer due to sales discounts, suspensions, or returns shall be deducted from the output tax amount of the current period; the amount of VAT recovered due to sales discounts, suspensions, or refunds shall be deducted from the input tax amount of the current period.

Article 14 If a taxpayer calculates and pays VAT in accordance with the simplified tax calculation method, the sales returned to the buyer due to sales discounts, suspensions, or refunds shall be deducted from the current sales. If there is still an overpayment of tax after deducting the current sales, it can be deducted from future tax payable or applied for a refund according to regulations.

Article 15 The total price referred to in Article 17 of the VAT Law does not include the following taxes or payments collected by the taxpayer on behalf of the taxpayer:

(1) Government funds or administrative fees;

(2) Consumption tax generated by the processing of consumer goods subject to consumption tax;

(3) Vehicle purchase tax, vehicle and ship tax;

(4) Issuing invoices in the name of the entrusting party to receive money on behalf of the entrusting party.

Article 16 If a taxpayer adopts the combined pricing method of sales and value-added tax, the sales shall be calculated according to the following formula:

Sales under the general tax calculation method = sales including tax ÷ (1 + tax rate)

Sales under the simplified taxation method = sales including tax ÷ (1 + collection rate)

Article 17 If the taxpayer settles sales in a currency other than RMB, the conversion rate may choose the central parity of the RMB exchange rate in effect on the day the sales occur or on the first day of the month. After the taxpayer determines the conversion rate, it shall not be changed within 12 months.

Article 18 If a taxpayer encounters the circumstances specified in Article 20 of the VAT Law, the tax authorities may verify the sales in order in accordance with the following methods:

(1) Determined according to the average price of the taxpayer’s sale of similar goods, services, intangible assets, or real estate in the most recent period;

(2) Determined according to the average price of similar goods, services, intangible assets, or real estate sold by other taxpayers in the most recent period;

(3) Determined according to the composition taxable price. The formula for calculating the taxable price is:

Component taxable price = cost × (1 + cost profit margin) + consumption tax amount

The cost profit margin in the formula is 10%, and the tax department of the State Council can adjust the cost profit margin according to the actual situation of industry costs and profits.

Article 19 The term “abnormal loss” referred to in Article 22, Item 3 of the VAT Law includes theft, loss, mold and deterioration of goods caused by poor management, as well as the confiscation, destruction, or demolition of goods or real estate in accordance with the law due to violations of laws and regulations.

The items of abnormal losses referred to in Article 22, Item 3 of the VAT Law include:

(1) Purchased goods with abnormal losses, as well as related processing, repair services, and transportation services;

(2) Purchased goods (excluding fixed assets), processing, repair services, and transportation services consumed in products and finished products with abnormal losses;

(3) Real estate with abnormal losses, as well as purchased goods and construction services consumed by such real estate;

(4) Purchased goods and construction services consumed in real estate projects under construction with abnormal losses. Real estate projects under construction include taxpayers’ new construction, reconstruction, expansion, repair, and decoration of real estate.

The goods referred to in items 3 and 4 of paragraph 2 of this article include the materials and equipment that constitute real estate entities, including building decoration materials and water supply and drainage, heating, sanitation, ventilation, lighting, communications, gas, fire protection, central air conditioning, elevators, electricity, photovoltaic power generation, intelligent building equipment, and supporting facilities.

The term “fixed assets” as used in these Regulations refers to machinery, tools, means of transportation, and other equipment, tools, and appliances related to production and operation that have been used for more than 12 months.

Article 20 Taxpayers’ social and entertainment consumption is referred to as personal consumption under the VAT Law.

Article 21 The interest expenses of the taxpayer’s purchase of loan services, as well as investment and financing consulting fees, handling fees, consulting fees, and other expenses directly related to the loan services paid to the lender, shall not be deducted from the output tax for the time being.

The competent departments of finance and taxation under the State Council shall study and evaluate the input tax corresponding to the purchase of loan service interest and related expenses in a timely manner and shall not deduct the effect of policy implementation from the output tax.

Article 22 If a taxpayer purchases goods, services, intangible assets, or real estate for non-taxable transactions that meet the following conditions (hereinafter collectively referred to as non-taxable transactions), the corresponding input tax shall not be deducted from the output tax:

(1) Engaging in business activities other than Articles 3 to 5 of the VAT Law and obtaining related monetary or non-monetary economic benefits;

(2) Circumstances that do not fall under Article 6 of the VAT Law.

Article 23 If a general taxpayer purchases goods (excluding fixed assets) or services for taxable items, value-added tax exemption items, and non-taxable transactions that cannot be deducted and cannot be classified into non-deductible input taxes, the non-deductible input tax amount shall be calculated periodically according to the proportion of sales or revenue, and the annual summary and liquidation shall be carried out during the tax return period in January of the following year.

Article 24 If the circumstances specified in Items 3 to 5 of Article 22 of the VAT Law occur for the purchase of goods (excluding fixed assets) and services that have been deducted from input tax, the corresponding input tax shall be deducted from the current input tax; if the corresponding input tax cannot be determined, the input tax to be deducted shall be calculated according to the actual cost of the current period.

Article 25 Fixed assets, intangible assets, or real estate (hereinafter collectively referred to as long-term assets) acquired by general taxpayers are used not only for taxable items under the general taxation method but also for taxable items under the simplified taxation method, value-added tax exemption items, non-taxable transactions, collective welfare, or personal consumption (hereinafter collectively referred to as the five types of non-deductible items) and are long-term assets used for mixed purposes. The corresponding input tax amount shall be treated in accordance with the VAT Law and the following provisions:

(1) For a single long-term asset with an original value of not more than 5 million yuan, the corresponding input tax can be fully deducted from the output tax;

(2) For a single long-term asset with an original value of more than 5 million yuan, the input tax amount shall be fully deducted at the time of purchase, and then the input tax corresponding to the five types of non-deductible items shall be calculated according to the adjustment period and adjusted year by year.

The specific operational measures for the deduction of long-term asset input tax shall be formulated by the finance and taxation departments of the State Council.

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Chapter IV Tax Incentives

Article 26 The term “agricultural producers” in Paragraph 1, Paragraph 1 of Article 24 of the VAT Law refers to units and individuals engaged in agricultural production; agricultural products refer to primary agricultural products.

Article 27 The medical institutions referred to in Article 24, paragraph 1, item 2 of the VAT Law refer to institutions with medical institution practice qualifications established in accordance with relevant provisions, including medical institutions at all levels and types of military and armed police forces, excluding for-profit beauty medical institutions.

Article 28 The term “old books” referred to in Article 24, paragraph 1, item 3 of the VAT Law refers to ancient and old books purchased by society.

Article 29 The term “nursery schools and kindergartens” referred to in Item 7 of Paragraph 1 of Article 24 of the VAT Law refers to institutions established in accordance with relevant provisions that have obtained childcare or preschool education qualifications, and their income exempt from VAT refers to the childcare fees and childcare education fees within the provisions of the relevant charging standards; elderly care institutions refer to various elderly care institutions established in accordance with relevant regulations to provide centralized accommodation and care services for the elderly; service institutions for persons with disabilities refer to institutions established in accordance with relevant regulations to provide relevant services for persons with disabilities.

Article 30 The term “school,” as used in Item 8 of Paragraph 1 of Article 24 of the VAT Law, refers to institutions that provide academic education, as well as technical schools, senior technical schools, and technician colleges established in accordance with relevant provisions.

Article 31 The ticket revenue referred to in Item 9, Paragraph 1 of Article 24 of the VAT Law refers to the first ticket revenue.

Article 32 The scope, standards, and conditions of preferential value-added tax policies shall be disclosed to the public in a timely manner in accordance with the law.

Article 33 The competent departments of finance and taxation under the State Council shall study and evaluate the implementation effect of preferential value-added tax policies in a timely manner and promptly report to the State Council for the adjustment and improvement of preferential policies that no longer meet the needs of national economic and social development.

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Chapter 5 Expropriation Management

Article 34 Where a unit operates by way of contracting, leasing, or affiliation, and the contractor, lessee, or affiliated person operates externally in the name of the employer, lessor, or affiliated person, and the employer, lessor, or affiliated person bears relevant legal liabilities, the employer, lessor, or affiliated person shall be the taxpayer; in other cases, the contractor, lessee, and affiliate are taxpayers.

For taxable transactions that occur in the course of the operation of asset management products, the asset management product manager is the taxpayer. Where the law provides otherwise, those provisions shall prevail.

Article 35 When a natural person engages in a taxable transaction that meets the regulations, the domestic unit that pays the price shall be the withholding agent. The specific operational measures for withholding and payment shall be formulated by the finance and taxation departments of the State Council.

If an overseas entity or individual leases domestic real estate to a natural person and has a domestic agent, the domestic agent shall declare and pay taxes.

Article 36 Except as otherwise provided in these Regulations, if the annual VAT payable sales of units and individual industrial and commercial households exceed the standard for small-scale taxpayers, they shall register as general taxpayers with the competent tax authorities and calculate and pay VAT in accordance with the general taxation method from the current period when they exceed the standard for small-scale taxpayers.

If a small-scale taxpayer meets the provisions of Article 9, paragraph 2 of the VAT Law, they may register as a general taxpayer with the competent tax authority and calculate and pay VAT according to the general tax calculation method from the current period of registration.

After registering as a general taxpayer, taxpayers shall not revert to small-scale taxpayer status.

Article 37 A taxpayer shall issue an invoice to the purchaser in the event of a taxable transaction. Under any of the following circumstances, a special VAT invoice shall not be issued:

(1) The purchaser of the taxable transaction is a natural person;

(2) Taxable transactions are exempt from VAT;

(3) Other circumstances stipulated by the competent departments of finance and taxation under the State Council.

Article 38 If a taxpayer has a taxable transaction and issues a special VAT invoice, or if there is an error in the invoice issuance or a discount, suspension, or return of sales, it shall be invalidated, or a special VAT invoice shall be issued in accordance with the provisions of the competent tax department under the State Council; if the invalidation is not carried out in accordance with the regulations or a special VAT invoice in red letters is issued, the output tax or sales shall not be deducted in accordance with the provisions of Articles 13 and 14 of these Regulations.

Article 39 The sales proceeds referred to in Paragraph 1, Paragraph 1 of Article 28 of the VAT Law refer to the payments received by the taxpayer in the course of taxable transactions or after completion. The date of obtaining the sales payment receipt refers to the payment date determined by the written contract, and the date of payment without a written contract or when the written contract does not determine the payment date refers to the date of completion of the taxable transaction, that is, the date on which the goods are issued, the service is completed, the ownership of financial goods is transferred, the transfer of intangible assets is completed, or the transfer of real estate is completed.

Article 40 The date of completion of the deemed taxable transaction referred to in Paragraph 1, Item 2 of Article 28 of the VAT Law refers to the date on which the goods are issued, the ownership of financial instruments is transferred, the transfer of intangible assets is completed, or the transfer of real estate is completed.

Article 41 If the export date of the taxpayer’s export is earlier than the time of the tax obligation specified in Paragraph 1 and Items 1 and 2 of Article 28 of the VAT Law, the tax obligation shall occur on the day of the customs declaration and export of the goods.

Article 42 The term “taxpayers with fixed production and business premises,” whose head office and branches are not in the same province (autonomous region or municipality directly under the Central Government), may be aggregated by the head office to declare tax payment to the competent tax authority where the head office is located with the approval of the competent department of finance and taxation under the State Council. If the head office and branches are in the same province (autonomous region or municipality directly under the Central Government) but not in the same county (city, district, banner), with the approval of the provincial (autonomous region or municipality) finance and taxation department, the head office may summarize and report tax to the competent tax authority where the head office is located.

Article 43 The following taxpayers may apply the tax period stipulated in Article 30 of the VAT Law on a quarterly basis:

(1) Small-scale taxpayers;

(2) Banks, finance companies, trust companies, and credit cooperatives among general taxpayers;

(3) Other taxpayers determined by the competent departments of taxation and finance under the State Council.

Article 44 Taxpayers who pay taxes on a one-time basis shall declare their tax returns from the date of their tax obligation to June 30 of the following year.

Article 45 Taxes shall be paid in advance in accordance with the following circumstances:

(1) Provision of construction services across prefecture-level administrative regions (counties and districts under the jurisdiction of municipalities directly under the Central Government);

(2) Providing construction services by means of advance payment;

(3) Selling real estate projects by pre-sale;

(4) Transferring or leasing real estate that is not located in the same county (city, district, banner) as the taxpayer’s institution;

(5) Oil and gas field enterprises selling services related to the production of crude oil and natural gas across provinces, autonomous regions, and municipalities directly under the Central Government.

The specific operational measures for prepayment of tax as provided for in the first paragraph of this article shall be formulated by the competent departments of finance and taxation under the State Council.

Article 46 Where the head office is approved by the competent departments of finance and taxation at or above the provincial level to file a summary tax return, the approving department may stipulate that the branch office shall prepay the tax.

Article 47 If a taxpayer exports goods or cross-border sales services or intangible assets (hereinafter collectively referred to as export business) and declares a tax refund (exemption) in accordance with the provisions of Article 33 of the VAT Law, the tax refund (exemption) amount shall be calculated through the tax exemption and refund method or the tax refund method in accordance with the export tax rebate rate prescribed by the State Council.

The tax exemption and refund method means that the export link is exempt from value-added tax, and the corresponding input tax is offset from the value-added tax payable, and the undeducted part is refunded; the tax refund method means that the export link is exempt from value-added tax, and the corresponding input tax amount is refunded.

Article 48 Taxpayers shall declare their export business subject to tax refund (exemption) or VAT exemption in accordance with the prescribed time limit; if the declaration is not made within the time limit, VAT shall be paid in accordance with the provisions of deemed domestic sales.

If the taxpayer exports goods by entrustment, it shall go through the export formalities of the entrustment agency in accordance with the provisions of the tax department under the State Council, and the entrusting party shall declare and handle export tax refund (exemption), VAT exemption, or payment of VAT in accordance with the regulations; if the export procedures are not entrusted to the agent, the consignor of the exported goods shall declare and pay VAT in accordance with the regulations.

Article 49 Taxpayers may waive the tax refund (exemption) and choose to be exempt from VAT or pay VAT from the month following the date of waiver of the tax refund (exemption).

Taxpayers who apply for VAT exemption can waive VAT exemption and choose to pay VAT from the month following the date of VAT exemption.

If a taxpayer gives up the export business of tax refund (exemption) or VAT exemption, the tax refund (exemption) or VAT exemption shall not be reapplied within 36 months.

Article 50 If the export business for tax refund (exemption) occurs in the event of a sales discount, suspension, or refund, the taxpayer shall pay back the tax refund (exemption).

Article 51 The specific operational measures for VAT export tax rebates (exemptions) shall be formulated by the competent departments of finance and taxation under the State Council.

Article 52 The tax authorities may obtain logistics, customs declaration, cargo transportation agency, fund settlement, and other information related to export tax collection and management from relevant units and individuals in accordance with the law, and the relevant units and individuals shall provide it. The tax authorities and their staff shall keep the relevant information confidential and shall not use it for purposes other than tax collection and management. Where laws and administrative regulations provide otherwise, those provisions shall prevail.

Article 53 If a taxpayer implements an arrangement that does not have a reasonable commercial purpose and reduces, exempts, or delays the payment of value-added tax, or refunds tax in advance or overrefunds, the tax authorities may make adjustments in accordance with the Tax Collection and Administration Law of the People’s Republic of China and relevant administrative regulations.

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Chapter VI Supplementary Provisions

Article 54: These Regulations shall come into force on January 1, 2026.

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.

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