In a significant move to streamline its taxation system, China’s national legislature has approved a new Value-Added Tax (VAT) law, scheduled to take effect on January 1, 2026. The legislation consolidates previous regulations, including exemptions for certain items, aiming to enhance economic efficiency and provide clarity for businesses.
VAT, the country’s largest tax category, accounted for approximately 39 percent of China’s total tax revenue in 2023, according to official data. In the first 11 months of 2024, VAT revenue reached around 6.12 trillion yuan ($838 billion), representing about 37.8 percent of the nation’s tax income.
The new law comprises six chapters and 38 articles, outlining key provisions such as the scope of VAT taxation, applicable tax rates, and methods for determining tax payable. It introduces a zero tax rate for certain exports and establishes guidelines for tax incentives, supporting the growth of export-oriented industries. Additionally, the legislation sets a threshold for small-scale taxpayers, offering them relief under the new system and fostering a more inclusive business environment.
The approval of the VAT law reflects China’s ongoing efforts to modernize its tax framework, promote fair competition, and stimulate economic development. By providing clearer guidelines and support for small businesses, the law is expected to contribute positively to the country’s economic landscape as it moves toward implementation in 2026.
Reference(s):
cgtn.com
