- New VAT framework for “long‑term assets” in China (effective 1 Jan 2026): The VAT Law and its Detailed Implementation Rules introduce “long‑term assets” (fixed assets, intangible assets, and immovable assets) with specific input VAT credit rules, clarified by MOF/STA Public Notice [2026] No.15 (PN15).
- Input VAT credit depends on use and asset value (RMB 5m threshold):
- Exclusive taxable use → full credit; exclusive non‑creditable use → no credit.
- Mixed use: assets ≤ RMB 5m → full credit; assets > RMB 5m → full credit upon acquisition plus annual instalment adjustments over set adjustment periods (5/10/20 years depending on asset type).
- Operational impact for enterprises: Companies must track asset use over the lifecycle, perform annual adjustments (first in Jan 2027), manage use‑change scenarios, and establish dedicated VAT ledgers and documentation—potentially leveraging tax technology—amid areas still awaiting further STA clarification.
Source PwC
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