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In 2026, a new tax policy was launched that affected millions of people and businesses. The ministry of finance and the general tax administration issued a joint announcement specifying that, as of 1 january 2026, vat operations, which would have applied a 5 per cent rate, would have been harmonized to 3 per cent. One might say, “isn't it a change of a few percentage points”, but the account is calculated, whether it is an ordinary person who buys a house or runs a small business, with a real dividend。
The new deal was not launched in a vacuum and had a clear legal basis behind it. The law of the people's republic of china on value added tax of 25 december 2024 and the implementing regulation of 30 december 2025, which synchronized the collection rate of value added tax to 3 per cent, mark a more regulated and favourable phase in the country's first largest tax. In short, some operations, which had previously been taxed at 5 per cent, have now been harmonized to 3 per cent, and some small taxpayers have benefited from a 3 per cent discount of 1 per cent until the end of 2027。
First of all, the property transactions that are of greatest concern to everyone are areas where the benefits are felt most directly by ordinary people. The 5 per cent value added tax (vat) that had previously been paid by individuals for less than two years appeared to be borne by the seller and, in practice, was often transferred to the house price and ultimately paid by the buyer. With the implementation of the new deal, the tax rate was reduced directly to 3 per cent, which would save money。
Mr. Liu in beijing has just signed a set of five million second-hand rooms, and according to his previous policy he was required to pay 238,000 vat, with only 14,56,000 after the new deal came into existence and 92,000 saved at once. This is not a small amount, equal to the average working person's salary for several months, sufficient for renovations to add new furniture or to offset part of the down payment pressure. There is no doubt that this “saving” burden can be alleviated for families preparing to change their homes。
The housing agency was also impressed by the fact that many customers had previously been stuck to taxes and fees, “3 million houses with a value added tax alone of 150,000, the buyer's down payment was already tight, and that money, together with many transactions, was yellow”. Tax rates are now reduced, buyers are less pressured, sellers have more flexible bargaining space, and second-hand house trading is expected to be smoother, especially if the demand for improved replacements is further activated. Moreover, the policy is particularly human, and those who did not declare their contributions before 1 january 2026 can be implemented under the new policy, provided that the conditions are met, giving both buyers and sellers a buffer period。
Apart from real estate transactions, the benefits of small businesses are even greater. Which businesses would benefit from this benefit? These are mainly categories where a 5 per cent collection rate was previously applied: real estate leases (e. G., rental shops, office buildings), labour contribution differential taxes, transfer of old land tenure, sale of old real estate projects, etc。
There is a real estate leasing company for small taxpayers in nanjing, which in 2025 received $1 million in annual rent income without tax, and a vat of 50,000 at the original 5 per cent rate. Following the implementation of the new deal in 2026, the 3 per cent discount was reduced to 1 per cent, with only 10,000, and a direct 80 per cent reduction in the tax burden. The amount of $40,000 saved, which can be used to renovate shops, improve the quality of services, or raise wages for employees, is a real development fund for micro-enterprises。
There are also companies that contribute labour, such as an enterprise that collects 2 million dollars a year, which previously paid 100,000 vat, which is now down to 60,000, saving 40,000 to expand operations and recruit new recruits. For many micro-enterprises struggling on the profit-and-loss line, these percentage points of preference may be the key to survival and better outcomes。
But here's an important reminder for businesses to pay attention to sales thresholds. The standard for small taxpayers is an annual sale of 5 million, and if business grew too fast in 2026 and sales exceeded 5 million, they would be automatically recognized as ordinary taxpayers, subject to a 9 per cent tax rate. The tax burden may rise if the enterprise is under-recognised, such as when the main cost is depreciation of the house. It is therefore important for employers to measure the scale of their operations ahead of schedule and to plan the pace of their operations in a rational manner so as not to burden them with policy dividends。
There may be a question: “does the reduced tax rate affect the quality of services or the price of products?” this fear is not really necessary. The policy was originally designed to reduce operating costs and activate the market. In the long run, when the burden of taxes and fees is reduced, enterprises become more financially engaged and can instead provide better products and services. For consumers, lower transaction costs, whether for rent or services, benefit indirectly。
Others felt that “is tax policy too complex to benefit from benefits?” in fact, the implementation of the new deal is clear and tax authorities have adjusted their tax returns and simplified the filing process. An enterprise needs only to comb through its type of business to confirm whether it falls within the original 5 per cent collection rate and then adjust the billing system and contract terms in a timely manner. For example, in the case of ongoing lease contracts, new rates should be identified in supplementary agreements to avoid subsequent disputes; the right rate should be selected for the issuance of tickets, ensuring that tax compliance is accompanied by a preference。
For ordinary people, the most important thing is to understand the scope of the policy. If you have a recent plan to buy and sell a house, especially a second-hand house for less than two years, you need to figure out the amount of the tax and expensary discount and arrange the transaction time; if you rent a house, you can also communicate with the landlord to see if the rent can be adjusted properly because of lower taxes, after all, the policy dividend should be shared between the seller and the buyer。
This vat adjustment is essentially a “gold and silver” dividend for the market. For individuals, the transaction costs of housing have been reduced to support rigid and improved demand for housing; for businesses, the burden of doing business has been reduced, especially by the fact that micro-enterprises have access to more adequate cash flows; and for the market as a whole, the dynamism of transactions has been activated to promote economic cycles. As experts have said, this is the “most liberal phase in history” of vat policy, reflecting both the principle of taxation and the need for livelihood and enterprise development。
Of course, policy landing will take time to test and there may be specific operational problems for enterprises or individuals. For example, how policies are applied in cross-border operations, tax awards for mixed sales, etc., may be accompanied by more detailed documentation from subsequent tax administrations. You can follow up on the official circulars of the general tax administration and leave a message to share your doubts, and yang will update you in a timely manner。
