China Publishes Draft VAT Law Regulations for Public Input

On August 12, China released a draft version of regulations to implement the new value-added tax (VAT) law and opened a public consultation period.

The draft of the implementation regulations for China’s VAT Law, issued yesterday by the Ministry of Finance and the State Taxation Administration, will be open for feedback until September 10.

VAT is the country’s largest tax source, bringing in approximately 6.57 trillion yuan (about $914.2 billion) last year, representing 38% of total fiscal revenue. A revised version of the VAT Law was approved in December, with plans to go into effect on January 1, 2026.

The implementation rules follow the framework of the VAT Law, align with the VAT system, and consider practical and administrative needs to clarify detailed rules. They comprise 57 articles divided across six sections: general provisions, tax rates, taxable amounts, tax incentives, tax administration, and supplementary provisions.

The general provisions specify and clarify key tax elements, such as the definition of taxpayers and the scope of taxable transactions, as outlined in the VAT Law. They clearly specify what constitutes exported goods, cross-border transaction services, and intangible assets.

“The regulations supporting the VAT Law are crucial administrative measures that underpin the law itself,” stated Liang Ji, director of the Research Center for Government Revenues at the Chinese Academy of Fiscal Sciences, citing reports by official news agency.

“Alongside the VAT Law and related policy documents, they form the legal structure of China’s VAT system and are essential to the law’s effective implementation,” Liang added.

He also mentioned that these regulations clarify what transactions are taxable and what can be deducted under the VAT Law, improve deduction standards, simplify deduction procedures, streamline processes, and promote specialization in administration. These efforts aim to facilitate the smooth flow of production, enhance resource allocation efficiency, and support the development of a unified national market.

Liu Xuhong, vice president of the Beijing National Accounting Institute, highlighted that these implementation regulations are a key foundation for the VAT Law. A stable tax system helps boost investor confidence, stabilize business expectations, attract investment, and support sustainable business growth, he noted.