China has approved a new law about Value-Added Tax (VAT), which will begin on January 1, 2026. This law combines previous rules and outlines what items can be exempt from this tax. VAT is the biggest source of tax income in China and made up around 38% of all national tax earnings in 2023.
The new law includes exemptions for certain agricultural products, scientific research equipment, items for people with disabilities, and services from welfare institutions like nurseries and elderly care homes. The government can also add new items to the list of things that don’t have to pay tax to help some businesses.
This new VAT law means that now 14 out of 18 tax types in China have their own laws. This shows progress in following the rules about taxation. The law was approved by China’s National People’s Congress Standing Committee.
Recently, China announced tax breaks for buying and selling homes to help the struggling real estate market. They’ve also extended a policy that allows tax refunds for research groups buying Chinese-made equipment until the end of 2027.
In 2019, China reduced the VAT rates for manufacturers and workers in transportation and construction to help businesses. However, because the economy is slowing down, VAT income dropped by 4.7% in the first 11 months of this year compared to last year, reaching 6.1 trillion yuan (about $840 billion).
Despite this, VAT revenue showed signs of recovery in November, growing by 1.36%. Experts believe this increase means businesses are starting to do better, which may help the economy strengthen even more.
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