China Issues VAT Law Implementation Rules: Key Changes to Sourcing Rules for Services and Intangibles

• The State Council issued VAT Law Implementation Rules effective January 1, 2026, introducing significant changes to China’s VAT regime.
• The primary criterion for determining if a sale of services or intangible property occurs within China is now “the place of consumption.”
• The Implementation Rules clarify scenarios where services or intangible properties are considered consumed within China, including sales by overseas entities to domestic entities and those directly related to domestic goods, real estate, or natural resources.
• New concepts such as “overseas on-site consumption” and “directly related to domestic goods, real estate or natural resources” are introduced, creating some ambiguity for cross-border transactions.
• The rules reference OECD VAT/GST Guidelines, but further clarification is needed on the interpretation of “overseas on-site consumption” and its application to B2C scenarios.

Source: bakermckenzie.com

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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