China Cuts Value Added Tax - Takes Effect in 2026 and Exempts Certain Sectors
China passed a value-added tax law that will take effect on January 1, 2026. VAT, China's largest tax category, accounted for about 38% of national tax revenue in 2023, data show official data.
The report did not detail the provisions of the law. The latest draft included exemptions for some agricultural products, imported instruments and equipment for scientific research and teaching, some imported goods for the disabled and services provided by welfare institutions such as nurseries, kindergartens and institutions for the elderly.
To help specific sectors or businesses, the government can include new items in the area of tax deductions.
"With the introduction of the VAT law, 14 tax categories out of 18 in China have their own laws, which cover most of the tax revenue and mark significant progress in implementing the principle of legal taxation", official sources announce.
The law was passed at the end of a session of China's top legislature, the Standing Committee of the National People's Congress.
Last month, China unveiled tax incentives for home and land transactions to support the crisis-hit property market. Residents are exempt from VAT when they sell their homes at least two years after purchase.
In September 2023, the finance ministry said it would extend a VAT refund policy aimed at encouraging domestic and foreign research institutions to buy Chinese-made equipment until the end of 2027.
China in 2019 reduced the VAT rate for manufacturers to 13% from 16% and to 9% from 10% for the transport and construction sectors.
With the world's second-largest economy slowing, VAT revenue in the first 11 months of this year fell 4.7% year-on-year to $840 billion as businesses suffered demand poor interior. For the month of November, VAT revenues increased by 1.36%.
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