The law of the people's republic of china on value added tax (vat) has been in force since 1 january 2026. It maintains a three-story basic tax rate of 13 per cent, 9 per cent and 6 per cent, eliminates the tax exemption policy for “conceptive drugs and devices” and introduces a 3 per cent collection rate for seven new types of operations, and defines the policy of zero tax, tax exemption and small-scale taxpayers。
If you are required to issue or receive vat invoices, but there are doubts about the currently applicable rates, this may be due to the formal application of the vat act as of 1 january 2026 and the adjustment of the tax structure and rules applicable to some operations. The following is the application of tax rates on invoices in the various industries organized according to the latest regulations:
I. Scope of application of the 13 per cent rate
The rate is the statutory base rate for goods sales and partially processed repair and repair services and is applied to the flow of goods in entities such as manufacturing, wholesale and retail trade. Its core coverage includes sales of goods produced or commissioned, as well as operations specifically classified as “sale of goods”, such as leases of tangible movable property, sales of software products, etc。
1. Sale of goods such as mechanical equipment, automobiles, electronics, construction materials (e. G. Cement, steel) and chemical materials
2. Provision of processing, repair and repair services
3. Separate sale of auto parts, software products other than software copyright
Rental of tangible movable property (e. G. Equipment, vehicles, containers) without operators
5. Operational lease services such as surface and dry air transport leases。
Ii. Application of the 9 per cent tax rate
The tax is earmarked for transport, construction, basic telecommunications, real estate sales and specific agricultural-related services, reflecting the state's structural support for infrastructure and livelihood security industries. Tax rates are applied on the basis of the substance of the business rather than the name of the contract or the list of tickets issued。
1. Rail, road, water, air, pipeline transport services
2. Construction services (including general contracting, subcontracting, refurbishment, installation, repair, decoration)
3. Sale, transfer, financial lease of immovable property
4. Basic telecommunications services (voice calls, text messaging, bandwidth rental)
5. Marketing of agricultural production materials (e. G. Pesticides, agro-machines, membranes) and initial processing services for agricultural products。
Iii. Application of 6 per cent of tax rates
The tax is geared towards modern services, services and most intangible asset transfers, and emphasizes the suitability of knowledge-intensive, light asset-based economic activities. It is important to note that different tax rates may apply to different types of business in the same subject matter and are accounted for separately according to the substance of the business。
Information technology services (, systems integration, data processing)
Advisory services, business management services, market investigation services
3. Cultural creative services (design, advertising, intellectual property services)
Services (services, direct-fee financial services)
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5. Living services (tourism, catering, accommodation, education, medical care, recreation)。
Iv. Zero tax coverage
The zero tax rate is not tax-exempt, but “how much is collected and how much is refunded” for the export of goods and services, allowing full refund of the amount of the incoming tax. The application presupposes that the business actually takes place outside the country and meets the statutory requirements of export declaration, receipt of remittances and full documentation。
Goods for export (including import processing and re-export)
2. Cross-border provision of international transport services and space transport services
3. Services such as r & d, design, software, information, radio and video, which are exclusively consumed abroad, provided to offshore units
4. Other cross-border tax liabilities established by the ministry of finance and the general tax administration。
V. Scope of application of the 3 per cent collection rate
The rate is limited to small taxpayers and cannot be deducted from the tax. Since 2026, new regulations have been in force whereby sales are determined to be strictly at the time of the occurrence of the tax obligation and the income recovery is subject to retroactive adjustment of identification。
1. Taxable sales by small taxpayers
2. The application of a reduction of 1 per cent: by 31 december 2027, the taxable sales revenue of a 3 per cent rate applied to small vat taxpayers could be reduced by a 1 per cent rate
3. Exemptions: small taxpayers are exempt from vat-taxable sales with a combined monthly sales of not more than $100,000 (one quarterly tax period and not more than $300,000 per quarter)。
List of tax-exempt items
Tax exemption is a statutory exemption from tax obligations, which does not give rise to a tax write-off or may not be offset by a corresponding tax. The policy has been continued and some of the original tax exemption items have been cancelled or adjusted。
Agricultural producers sell their own produce
Contraception drugs and devices - the tax exemption was abolished on 1 january 2026
3. Old books, objects for persons with disabilities
4. Childcare and educational services provided by nurseries and kindergartens
5. Old-age services provided by pension institutions
6. Medical services provided by medical institutions
7. Services provided by students in hard labour。
