China’s national legislature has approved a new Value-Added Tax (VAT) law, set to take effect on January 1, 2026. This move consolidates previous regulations and introduces updates that aim to modernize the country’s taxation system.
VAT is a significant part of China’s economy, accounting for about 39% of its total tax revenue in 2023. With the new law, certain items will continue to be exempted from VAT, including medical services provided by healthcare institutions and imported equipment for scientific research.
The law introduces a zero tax rate for specific exports and sets guidelines for tax incentives. Small-scale taxpayers will benefit from a newly established threshold, offering them relief under the updated system.
Li Xuhong, vice president of the Beijing National Accounting Institute, described the VAT law as a milestone in China’s tax reform. \”It marks a major achievement in modernizing the system, from the shift from business tax to VAT to simplifying rates and improving tax refunds,\” Li said.
With the enactment of this law, China has now formalized 14 out of its 18 current tax categories, covering the bulk of its tax revenue. The new VAT law is expected to enhance the certainty of the tax framework and support the country’s ongoing economic development.
Reference(s):
cgtn.com
