- China’s Ministry of Finance and State Taxation Administration issued Announcement No. 25 of 2026 to further clarify the VAT Law, effective 1 September 2026, with retroactive application to unprocessed matters from 1 January 2026.
- Input VAT may still be deductible in certain non-VAT transactions if normal deduction conditions are met, including insurance compensation, cash/property donations, contractual damages where no taxable supply occurred, most free services, assignment of trade receivables from the taxpayer’s own taxable activities, and certain non-supply-linked government subsidies.
- Input VAT remains blocked for transactions outside China’s VAT scope, equity transfers (other than securities), dividend income from equity investments, and commodity futures trading before physical delivery.
- The guidance also clarifies VAT treatment of exemptions, asset reorganisations, discounts, bundled supplies, and general input VAT deduction rules.
Source: vatcalc.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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