China’s New VAT Law: Key Implementation Rules and Impacts for Foreign-Invested Enterprises

China’s State Council approved the VAT Law Implementation Regulations on December 19, 2025, with the law taking effect January 1, 2026.
The regulations provide a more codified and transparent legal framework for VAT, replacing a patchwork of previous policy circulars.
Key provisions clarify the definition of “domestic consumption” for cross-border services and intellectual property, specifying when VAT liability arises for foreign-invested enterprises (FIEs).
The changes aim to enhance tax certainty, improve compliance, and support investment planning for FIEs operating in China.

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.