China's national legislature approved a new value-added tax (VAT) law on Wednesday, marking a significant overhaul of the country's tax system. The legislation is set to take effect on January 1, 2026, and aims to consolidate existing regulations, including those that exempt certain items from taxation.
VAT has long been China's largest tax category, accounting for approximately 39 percent of the nation's total tax revenue in 2023. In the first 11 months of 2024 alone, VAT revenue reached around 6.12 trillion yuan ($838 billion), making up about 37.8 percent of the country's tax income.
The newly approved law is comprehensive, consisting of six chapters and 38 articles. Among its key provisions are the delineation of VAT taxation scope, the establishment of tax rates, and the mechanisms for determining tax payable. Notably, the law introduces a zero tax rate for certain exports, providing a boost to the export sector.
Additionally, the legislation sets clear guidelines for tax incentives and establishes a threshold for small-scale taxpayers, offering them relief under the new system. This move is expected to support small businesses and entrepreneurs, fostering a more inclusive economic environment as China continues to navigate its path towards sustainable growth.
Reference(s):
cgtn.com
