After the wait of many years China finally adopted Value Added Tax Law of the People's Republic of China (Decree No. 41 dated December 25, 2024). It will repeal all the existing regulations including Provisional Regulations of the People's Republic of China on Value-Added Tax.
Scope: This Law is formulated for the purpose of improving the value-added tax system conducive to high-quality development, standardizing the collection and payment of value-added tax, and protecting the legitimate rights and interests of taxpayers.
Entities and individuals (including individual industrial and commercial households) that sell goods, services, intangible assets and immovable property (hereinafter referred to as "taxable transactions") and import goods within the territory of the People's Republic of China (hereinafter referred to as "the territory") are VAT taxpayers and shall pay VAT in accordance with the provisions of this Law.
Date of commencement: It will take effect on January 1, 2026.
Taxpayers exempted from VAT: Taxpayers whose annual sales amount of value-added tax does not exceed 5 million yuans, hall be exempted from value-added tax.
Item exempted from VAT:- Following items are exempt from value-added tax:
(1) Self-produced agricultural products sold by agricultural producers, agricultural machine farming, drainage and irrigation, pest control, plant protection, agricultural and animal husbandry insurance, and related technical training operations, breeding and disease prevention and control of poultry, livestock, and aquatic animals;
(2) Medical services provided by medical establishments;
(3) Old books, items sold by natural persons that have been used by themselves;
(4) Imported instruments and equipment directly used for scientific research, scientific experiments and teaching;
(5) Imported materials and equipment provided by foreign governments and international organizations free of charge;
(6) Items directly imported by organizations of persons with disabilities for the exclusive use of persons with disabilities, and services provided by persons with disabilities themselves;
(7) Childcare services, marriage referral services, and funeral services provided by nursery schools, kindergartens, elderly care establishments, and service establishments for the disabled;
(8) Academic education services provided by the school and services provided by students on work-study programs;
(9) Ticket income from cultural activities held by memorial halls, museums, cultural centers, management bodies of cultural relics protection units, art galleries, exhibition halls, calligraphy and painting institutes, and libraries, and ticket income from cultural and religious activities held by religious sites.
The specific standards for tax-exempt items provided for in the preceding paragraph shall be prescribed by the State Council.
Tax rates:
1. The tax rate for the export of goods by taxpayers shall be zero; Except as otherwise provided by the State Council.
2. Cross-border sales of services and intangible assets by domestic entities and individuals within the scope prescribed by the State Council shall be subject to zero tax rate.
3. Tax rate shall be 9% for the sale of transportation, postal services, basic telecommunications, construction, immovable property leasing services, the sale of immovable property, the transfer of land use rights, and the sale or import of the following goods:
- Agricultural products, edible vegetable oil, edible salt;
- Tap water, heating, air conditioning, hot water, coal gas, liquefied petroleum gas, natural gas, dimethyl ether, biogas, and coal products for residential use;
- Books, newspapers, magazines, audio-visual products, electronic publications;
- Feed, fertilizer, pesticide, agricultural machinery, agricultural film.
4. Except as provided for in 1, 2 and 3, the tax rate shall be 13% for the sale of goods, processing and repair services, leasing services for tangible movable property, and imported goods by taxpayers.
5. Except as provided for in 2, 3 and 4 of this Article, the tax rate for the sale of services and intangible assets by taxpayers shall be 6%.
6. The levy rate of VAT shall be 3% for the calculation and payment of VAT by applying the simplified tax calculation method.
Obligations under the Law:
- Payment of value added tax in respect of the tax period which may be 10 days, 15 days, one month, or one quarter (as assigned by the Tax Authority)
- Filing of value added tax return in respect of the tax period which may be 10 days, 15 days, one month, or one quarter (as assigned by the Tax Authority)
- Issuances of invoices
Status of implementation: VAT law shall be read with the implementation regulations. Draft regulations were released for public comment on August 11, 2025. However final regulations are yet to be notified.
Implementation regulations are expected to be released soon before the commencement date (i.e. January 1, 2026).
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