- Introduction of Additional VAT Deduction Policy: Starting January 1, 2025, China’s Ministry of Finance is implementing an additional VAT deduction policy for advanced manufacturing companies, allowing eligible firms to reduce their VAT burden by claiming an extra 5% on deductible input VAT until December 31, 2027.
- Eligibility and Application Process: To qualify, businesses must have valid High and New Technology Enterprise (HNTE) status, generate over 50% of their revenue from manufacturing, and apply through the HNTE Certification Management System. Existing HNTEs must reapply between June 1, 2025, and April 10, 2026, while new applicants can start from September 1, 2025.
- Compliance Requirements and Key Considerations: Companies must maintain clean tax records, ensure their internal transactions do not count towards VAT deductions, and report any significant changes affecting their status. The effective implementation of this policy is designed to enhance cash flow and support the growth of the manufacturing sector in China.
Source China-briefing
