February 2026 / China

As of January 1, 2026, China has introduced a new comprehensive Value-Added Tax (VAT) law, replacing the previous provisional regulations in force since 1993 and establishing a clearer and more unified tax framework across the country.

1. A National VAT Law

The law, approved on December 25, 2024, elevates the VAT regime to the status of national legislation, strengthening legal certainty and tax governance. This marks an important step toward a more transparent and stable system for businesses, particularly foreign companies operating in China.

2. Core Structure Unchanged but Clearer

The main VAT rates (13%, 9%, and 6%) remain unchanged, ensuring continuity with the previous system. However, the new law provides clearer definitions of taxable transactions, covering goods, services, intangible assets, and real estate within a single, well-defined framework.

3. Detailed Rules and Modernization

At the end of 2025, implementing regulations were issued, outlining key operational aspects, including:

• Cross-border transactions: Taxation is based on the place of consumption of the service or intangible asset, aligning with international standards.
• Input tax credits for long-term assets: New rules governing VAT credits on non-current assets.
• Anti-avoidance provisions: Authorities are granted the power to adjust non-monetary transactions or transactions between related parties.

4. Greater Certainty for Foreign Businesses

The law and its implementing regulations provide further clarification on when overseas activities are subject to VAT in China, contributing to the reduction of potential double taxation risks and simplifying compliance for multinational enterprises.

5. A Unified and Digital Framework

With the entry into force of the new law, the modernization of China’s tax system is further consolidated, including the expansion of e-fapiao (electronic invoicing) and a more integrated digital tax administration system, consistent with global trends in tax digitalization.

The new Chinese VAT law of 2026 does not revolutionize tax rates, but it unifies and clarifies the regulatory framework, enhances legal and administrative safeguards, and introduces modern provisions for companies operating in one of the world’s largest markets.