Effective from January 1, 2026! Kailing Interprets the Full Text of the《Value-Added Tax Law of the People's Republic of China》

Order of the President of the People's Republic of China

No. 41

　　The "Value-Added Tax Law of the People's Republic of China" was adopted at the 13th session of the Standing Committee of the 14th National People's Congress of the People's Republic of China on December 25, 2024, and is hereby promulgated, taking effect on January 1, 2026.

President of the People's Republic of China Xi Jinping

December 25, 2024

Value-Added Tax Law of the People's Republic of China

(Adopted at the 13th Session of the Standing Committee of the 14th National People's Congress on December 25, 2024)

Contents

　　Chapter One General Provisions

　　Chapter 2 Tax rates

　　Chapter 3 Tax Payable

　　Chapter 4 Tax Incentives

　　Chapter 5 Collection Management

　　Chapter 6 Supplementary Provisions

Chapter One General Provisions

　　Article 1　This Law is enacted to improve the VAT system conducive to high-quality development, regulate the collection and payment of VAT, and protect the legitimate rights and interests of taxpayers.

　　Article 2　VAT tax work shall implement the lines, principles and policies, and decisions and arrangements of the Party and the State, and serve national economic and social development.

　　Article 3　Units and individuals (including individual industrial and commercial households) that sell goods, services, intangible assets, and real estate within the territory of the People's Republic of China (hereinafter referred to as within the territory), as well as those that import goods, are VAT taxpayers and shall pay VAT in accordance with the provisions of this Law.

　　The sale of goods, services, intangible assets, and real estate refers to the compensated transfer of ownership of goods and real estate, the compensated provision of services, and the compensated transfer of ownership or use rights of intangible assets.

　　Article 4　A taxable transaction occurring within the territory refers to the following circumstances:

　　(1) For the sale of goods, the place of dispatch or location of the goods is within the territory;

　　(II) Where real estate is sold or leased, or natural resource use rights are transferred, the location of the real estate or natural resources is within China;

　　(3) For sales of financial products, the financial products are issued within China, or the seller is a domestic entity or individual;

　　(4) In addition to the provisions of items 2 and 3 of this article, for the sale of services and intangible assets, the services and intangible assets are consumed within China, or the seller is a domestic entity or individual.

　　Article 5　If any of the following circumstances applies, it is deemed a taxable transaction and VAT shall be paid in accordance with the provisions of this Law:

　　(1) Entities and individually-owned businesses use self-produced or commissioned processed goods for collective welfare or personal consumption;

　　(2) Units and individual industrial and commercial households transferring goods free of charge;

　　(3) Units and individuals transferring intangible assets, real estate, or financial products without compensation.

　　Article 6　If any of the following circumstances applies, it is not a taxable transaction and VAT is not levied:

　　(1) Services provided by employees to the employing entity or employer for obtaining wages and salaries;

　　(II) Collection of administrative and institutional charges and government funds;

　　(3) Compensation obtained from expropriation or requisition in accordance with legal provisions;

　　(4) Deposit interest income obtained.

　　Article 7　VAT is an extra-price tax, and the sales amount of a taxable transaction does not include the VAT amount. The VAT amount shall be separately stated on the transaction voucher in accordance with the provisions of the State Council.

　　Article 8　If a taxpayer has a taxable transaction, it shall calculate and pay VAT according to the general tax calculation method, by deducting input VAT from output VAT to calculate the tax payable; except as otherwise provided by this Law.

　　A small-scale taxpayer may calculate and pay VAT using the simplified tax calculation method, under which the tax payable is calculated based on the sales amount and the levy rate.

　　The tax calculation methods for VAT on Sino-foreign cooperative exploitation of offshore oil and natural gas shall be implemented in accordance with relevant State Council provisions.

　　Article 9　Small-scale taxpayers referred to in this Law means taxpayers whose annual VAT-taxable sales amount does not exceed 5 million yuan.

　　If a small-scale taxpayer has sound accounting and can provide accurate tax information, it may register with the competent tax authority and calculate and pay VAT according to the general tax calculation method stipulated in this Law.

　　Based on the needs of national economic and social development, the State Council may adjust the standards for small-scale taxpayers and report them to the Standing Committee of the National People's Congress for the record.

Chapter 2 Tax rates

　　Article 10　VAT rates:

　　(1) Where a taxpayer sells goods, provides processing, repair and replacement services, or tangible movable property leasing services, or imports goods, the tax rate is 13 percent, except as provided in items 2, 4 and 5 of this Article.

　　(II) Where a taxpayer sells transportation, postal, basic telecommunications, construction, and real estate leasing services, sells real estate, transfers land use rights, or sells or imports the following goods, the tax rate shall be nine percent, except as provided in Items 4 and 5 of this Article:

　　1. Agricultural products, edible vegetable oil, edible salt;

　　2. Tap water, heating, cold air, hot water, coal gas, petroleum liquefied gas, natural gas, dimethyl ether, biogas, and coal products for residential use;

　　3. Books, newspapers, magazines, audio-visual products, and electronic publications;

　　4. Feed, chemical fertilizer, pesticides, agricultural machinery, and agricultural film.

　　(3) For taxpayers selling services and intangible assets, except as provided in items 1, 2, and 5 of this Article, the tax rate is 6 percent.

　　(4) For goods exported by taxpayers, the tax rate is zero; except as otherwise provided by the State Council.

　　(5) The tax rate is zero for cross-border sales of services and intangible assets within the scope prescribed by the State Council by domestic entities and individuals.

　　Article 11　The levy rate for calculating and paying VAT under the simplified taxation method is three percent.

　　Article 12　If a taxpayer has two or more taxable transactions involving different tax rates or levy rates, it shall separately account for the sales amounts subject to different tax rates or levy rates; if not separately accounted for, the higher tax rate shall apply.

　　Article 13　If a taxpayer has one taxable transaction involving two or more tax rates or levy rates, the tax rate or levy rate applicable to the main business of the taxable transaction shall apply.

Chapter 3 Tax Payable

　　Article 14　For VAT calculated and paid according to the general taxation method, the tax payable is the balance after deducting the current period's input tax from the current period's output tax.

　　Where VAT is calculated and paid under the simplified taxation method, the tax payable is the current period's sales amount multiplied by the levy rate.

　　For imported goods, VAT shall be calculated and paid according to the composite assessable price stipulated in this Law multiplied by the applicable tax rate. The composite assessable price is the customs dutiable value plus customs duty and consumption tax; if the State Council provides otherwise, those provisions shall prevail.

　　Article 15　Where overseas units and individuals conduct taxable transactions within China, the purchaser shall be the withholding agent; except where, in accordance with State Council provisions, a domestic agent is entrusted to file and pay taxes.

　　Where the withholding agent withholds and remits tax in accordance with the provisions of this Law, the amount of tax to be withheld shall be calculated by multiplying the sales amount by the tax rate.

　　Article 16　Output tax refers to the VAT amount calculated by multiplying the sales amount by the tax rate stipulated in this Law when a taxpayer engages in taxable transactions.

　　Input VAT refers to the VAT amount paid or borne by a taxpayer for the purchase of goods, services, intangible assets, and real estate.

　　A taxpayer shall deduct input tax from output tax on the basis of VAT deduction vouchers prescribed by laws, administrative regulations, or the State Council.

　　Article 17　Sales amount refers to the price obtained by a taxpayer in connection with a taxable transaction, including the full price corresponding to economic benefits in monetary and non-monetary forms, excluding the output tax calculated according to the general tax calculation method and the tax payable calculated according to the simplified tax calculation method.

　　Article 18　The sales amount is calculated in RMB. If a taxpayer settles the sales amount in a currency other than RMB, it shall be converted into RMB for calculation.

　　Article 19　Where deemed taxable transactions as stipulated in Article 5 of this Law occur and the sales amount is in non-monetary form, the taxpayer shall determine the sales amount according to market prices.

　　Article 20　If the sales amount is obviously low or high without justified reasons, the tax authority may determine the sales amount in accordance with the provisions of the "Law of the People's Republic of China on the Administration of Tax Collection" and relevant administrative regulations.

　　Article 21　For the portion of the current-period input VAT exceeding the current-period output VAT, the taxpayer may, in accordance with the provisions of the State Council, choose to carry it forward to the next period for continued deduction or apply for a refund.

　　Article 22　The following input tax amounts of a taxpayer may not be deducted from its output tax:

　　(1) Input tax corresponding to items subject to the simplified tax calculation method;

　　(2) Input tax amount corresponding to VAT-exempt items;

　　(3) Input VAT corresponding to items subject to abnormal losses;

　　(4) Input tax amounts corresponding to goods, services, intangible assets, and real estate purchased and used for collective welfare or personal consumption;

　　(5) Input tax amounts corresponding to catering services, daily resident services, and entertainment services purchased and directly used for consumption;

　　(6) Other input tax amounts prescribed by the State Council.

Chapter 4 Tax Incentives

　　Article 23　Where a small-scale taxpayer engages in taxable transactions and the sales amount does not reach the threshold, VAT shall be exempted; where the threshold is reached, VAT shall be calculated and paid in full in accordance with this Law.

　　The threshold standards specified in the preceding paragraph shall be prescribed by the State Council and reported to the Standing Committee of the National People's Congress for filing.

　　Article 24　The following items are exempt from VAT:

　　(1) Self-produced agricultural products sold by agricultural producers, and agricultural machinery plowing, irrigation and drainage, pest control, plant protection, agricultural and livestock insurance, and related technical training services, as well as breeding and disease prevention and control of poultry, livestock, and aquatic animals;

　　(2) Medical services provided by medical institutions;

　　(3) Antique and old books, and items used by individuals themselves sold by natural persons;

　　(4) Imported instruments and equipment used directly for scientific research, scientific experiments, and teaching;

　　(5) Imported goods and equipment provided as gratuitous aid by foreign governments and international organizations;

　　(6) Goods imported directly by organizations of persons with disabilities for the exclusive use of persons with disabilities, and services provided by individuals with disabilities;

　　(7) Childcare services provided by nurseries, kindergartens, elderly care institutions, and service institutions for the disabled, matchmaking services, and funeral services;

　　(8) Academic education services provided by schools, and services provided by students through work-study programs;

　　(9) Ticket revenue from cultural activities held by memorial halls, museums, cultural centers, management agencies of cultural relic protection units, art galleries, exhibition halls, calligraphy and painting academies, and libraries, and ticket revenue from cultural and religious activities held at religious venues.

　　The specific standards for the tax-exempt items specified in the preceding paragraph shall be prescribed by the State Council.

　　Article 25　Based on the needs of national economic and social development, the State Council may formulate special VAT preferential policies for situations such as supporting the development of small and micro enterprises, supporting key industries, encouraging innovation, entrepreneurship, and employment, and donations to public welfare undertakings, and report them to the Standing Committee of the National People's Congress for the record.

　　The State Council shall evaluate and adjust VAT preferential policies in a timely manner.

　　Article 26　If a taxpayer concurrently operates VAT preferential items, it shall separately account for the sales amount of the VAT preferential items; items not separately accounted for shall not enjoy the tax preference.

　　Article 27　Taxpayers may waive VAT preferences; if they waive the preference, they shall not enjoy that tax preference within 36 months, except for small-scale taxpayers.

Chapter 5 Collection Management

　　Article 28　The time when VAT tax liability arises shall be determined in accordance with the following provisions:

　　(1) For a taxable transaction, the time when the tax obligation arises is the day on which the sales proceeds are received or the voucher for claiming the sales proceeds is obtained; if an invoice is issued first, it is the day on which the invoice is issued.

　　(2) When a deemed taxable transaction occurs, the time when the tax liability arises shall be the day when the deemed taxable transaction is completed.

　　(3) For imported goods, the time when the tax obligation arises is the day the goods are declared for import.

　　The time when the VAT withholding obligation arises is the day when the taxpayer's VAT tax obligation arises.

　　Article 29　The place of VAT payment shall be determined in accordance with the following provisions:

　　(1) A taxpayer with a fixed place of production and operation shall file and pay taxes with the competent tax authority at the place of its institution or residence. If the head office and branches are not in the same county (city), they shall separately file and pay taxes with the competent tax authorities at their respective locations; with the approval of the finance and tax authorities at or above the provincial level, the head office may consolidate and file tax returns with the competent tax authority at the head office's location.

　　(II) Taxpayers without a fixed production and business premises shall file and pay taxes with the competent tax authority at the place where their taxable transaction occurs; if they fail to file and pay taxes, the competent tax authority at the place of their institution or residence shall recover the tax payable.

　　(3) Individuals selling or leasing real estate, transferring the right to use natural resources, or providing construction services shall declare and pay taxes to the competent tax authority at the location of the real estate, the location of the natural resources, or the place where the construction services occur.

　　(4) Taxpayers of imported goods shall file and pay taxes at the locations prescribed by customs.

　　(5) Withholding agents shall file and pay the withheld tax with the competent tax authority at the place where their institution is located or where they reside; if the institution is located or the person resides outside China, they shall file and pay the withheld tax with the competent tax authority at the place where the taxable transaction occurs.

　　Article 30　The tax calculation periods for VAT are ten days, fifteen days, one month or one quarter. The specific tax calculation period for a taxpayer shall be determined separately by the competent tax authority based on the amount of tax payable by the taxpayer. Taxpayers that do not frequently engage in taxable transactions may pay tax on a per-transaction basis.

　　If a taxpayer uses one month or one quarter as a tax calculation period, it shall file and pay tax within 15 days from the date the period expires; if it uses 10 days or 15 days as a tax calculation period, it shall file and pay tax within 15 days from the first day of the following month.

　　The tax calculation period and tax filing deadline for the withholding agent to remit tax shall be implemented in accordance with the provisions of the preceding two paragraphs.

　　Where a taxpayer imports goods, it shall file and pay the tax within the time limit prescribed by customs.

　　Article 31　If a taxpayer uses 10 days or 15 days as a tax calculation period, it shall prepay tax within 5 days from the date the period expires.

　　Where laws and administrative regulations provide otherwise for taxpayers' advance tax payments, those provisions shall prevail.

　　Article 32　VAT is collected by tax authorities, and VAT on imported goods is collected by customs on behalf of tax authorities.

　　Customs shall provide information on collected VAT and goods export declarations to tax authorities.

　　The measures for levying VAT on goods carried or mailed into China by individuals shall be formulated by the State Council and reported to the Standing Committee of the National People's Congress for the record.

　　Article 33　If a taxpayer exports goods or cross-border sells services or intangible assets and the zero tax rate applies, it shall file for tax refund (exemption) with the competent tax authority. The specific measures for export tax refund (exemption) shall be formulated by the State Council.

　　Article 34　A taxpayer shall issue and use VAT invoices in accordance with law. VAT invoices include paper invoices and electronic invoices. Electronic invoices have the same legal effect as paper invoices.

　　The state actively promotes the use of e-invoices.

　　Article 35　Tax authorities establish a VAT tax-related information sharing mechanism and work coordination mechanism with departments including industry and information technology, public security, customs, market supervision and administration, the People's Bank of China, and financial supervision and administration.

　　Relevant departments shall, in accordance with laws and administrative regulations and within the scope of their respective duties, support and assist tax authorities in carrying out VAT collection and management.

　　Article 36　The collection and administration of VAT shall be carried out in accordance with the provisions of this Law and the Law of the People's Republic of China on the Administration of Tax Collection.

　　Article 37　Where taxpayers, withholding agents, tax authorities, and their staff violate the provisions of this Law, legal liability shall be pursued in accordance with the Law of the People's Republic of China on the Administration of Tax Collection and relevant laws and administrative regulations.

Chapter 6 Supplementary Provisions

　　Article 38　This Law takes effect on January 1, 2026. The Interim Regulations of the People's Republic of China on VAT are repealed simultaneously.

KailingInterpretation

The "Value-Added Tax Law of the People's Republic of China" is an important law regulating the collection and payment of value-added tax, and is of great significance for safeguarding national tax revenue, promoting economic development, and protecting the rights and interests of taxpayers.

1. General provisions

▪ Legislative purpose: aims to improve the VAT system, regulate tax behavior, protect taxpayer rights, promote high-quality development, and ensure the VAT system plays a positive role in economic operation.

▪ Scope of application and taxpayers

Clarify that units and individuals (including individual industrial and commercial households) that sell goods, services, intangible assets, and real estate within China and import goods are VAT taxpayers, covering various economic activity entities.

Define taxable transactions to include paid transfer of ownership or use rights, and clarify the criteria for determining domestic taxable transactions, such as the place of departure or location of goods, the location of real estate and natural resources, and the place of issuance of financial products.

▪ Special transaction provisions

Deemed taxable transaction circumstances include self-produced or commissioned processed goods used for welfare consumption, gratuitous transfer of goods and intangible assets, etc., ensuring tax fairness.

Employees providing services to obtain wages and salaries, administrative and institutional charges, and other items that are not taxable transactions are clearly within the non-taxable scope.

▪ Tax calculation methods and taxpayer classification

A general taxpayer applies the general tax calculation method and calculates the tax payable by deducting input tax from output tax, while a small-scale taxpayer may choose the simplified tax calculation method and calculate based on sales amount and levy rate.

The standard for a small-scale taxpayer is annual VAT-taxable sales not exceeding 5 million yuan; it may convert to a general taxpayer according to conditions, and the State Council may adjust the standard and file it for record.

2. Tax rate

▪ Tax rate settings

Multiple tax rates apply to different taxable activities: 13% applies to sales of goods, etc.; 9% applies to specific goods and services; 6% applies to sales of services and intangible assets (with some exceptions); and the zero rate applies to exported goods and cross-border sales of specific services and intangible assets.

The simplified tax calculation method has a unified levy rate of 3%, making it easier for small-scale taxpayers to calculate tax.

▪ Handling of special circumstances

Concurrent taxable transactions subject to different tax rates and levy rates must have sales amounts accounted for separately; otherwise, the higher tax rate applies, preventing tax avoidance by taxpayers.

When a taxable transaction involves multiple tax rates, the applicable tax rate is determined by the main business based on the levy rate, maintaining the reasonableness of tax policy.

3. Tax payable

▪ Calculation methods and formulas

The tax payable under the general tax calculation method is the current output tax minus input tax, under the simplified tax calculation method it is sales amount multiplied by levy rate, and imported goods are calculated by composite assessable value multiplied by tax rate.

Clarify the calculation rules for output tax, input tax, and sales amount, including foreign currency settlement, deemed taxable transactions, and special sales amount determination, ensuring accurate tax calculation.

▪ Input tax deduction rules

It stipulates the vouchers for deductible input VAT and clarifies items whose input VAT shall not be deducted, such as simplified tax calculation projects and VAT-exempt projects, preventing tax loopholes.

Allow the current-period input tax amount to be carried forward to the next period or refunded when it exceeds the output tax amount, easing taxpayers' funding pressure.

4. Tax incentives

▪ Small-scale taxpayer benefits

VAT is exempted for amounts below the threshold. The threshold standard is prescribed by the State Council and filed for record, supporting the development of small and micro enterprises.

▪ List of tax-exempt items

Involving multiple fields such as agriculture, medical care, culture and education, such as tax exemptions for self-produced agricultural product sales and medical services, promoting the development of social public welfare undertakings.

▪ Special preferential policies

The State Council may formulate special preferential policies supporting small and micro enterprises and evaluate and adjust them in a timely manner, flexibly adapting to economic development needs.

▪ Preferential policy management provisions

Concurrent preferential items require separate accounting of sales amounts to ensure precise implementation of preferential policies; taxpayers may waive preferences but with restrictions, safeguarding the seriousness of tax policy.

5. collection management

▪ Time when tax liability arises

Determined based on the type of taxable transaction and imported goods, ensuring timely and full collection of taxes, such as on the day when payment for a taxable transaction is received or evidence is obtained, or based on the invoice issuance date if an invoice is issued first.

▪ Determination of tax payment location

In accordance with regulations on taxpayer types and taxable activities, facilitate taxpayer filing and payment, e.g., taxpayers with a fixed place file with the tax authority at the institution or residence, and those without a fixed place file at the place where the transaction occurs.

▪ Tax calculation period and filing deadline

Multiple tax calculation periods are available for selection, approved by the competent tax authority, clarifying the tax filing and payment deadline to ensure timely tax payment into the treasury, e.g., filing within 15 days after the expiry of the monthly or quarterly filing period, and filing within 15 days of the following month for ten-day or daily filings.

▪ Responsibilities of the tax collection authority

Tax authorities are the primary collectors, with customs collecting VAT on imported goods on their behalf. All departments establish information sharing and coordination mechanisms to strengthen tax collection and administration.

▪ Invoice management regulations

Require invoices to be issued and used in accordance with the law, promote electronic invoices, and improve collection and management efficiency.

▪ Clear legal liability

Hold violators accountable in accordance with the Tax Collection and Administration Law and relevant regulations to maintain tax order.

6. Supplementary Provisions

▪ Effective date and repealed regulations

Effective January 1, 2026, while repealing the interim regulations, achieving a smooth transition of the tax system.

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