China VAT Law 2026: Effective Date, Rates & What Changed for Foreign Businesses

Q: How many VAT rates does China now have?

Three statutory rates: 13%, 9% and 6%, plus zero-rating for exported goods and specified cross-border services and intangible assets. The 3% levy rate for simplified calculation is set separately under Article 11. It is not a four-rate system.

Q: What actually changed for foreign companies under the VAT Law?

Four changes are most tangible: labour services are no longer a separate category, with processing, repair and replacement services now listed as services at 13%; the tax-exclusive nature of VAT is written into the law, with VAT shown separately on transaction documents; electronic invoices have the same legal effect as paper invoices; and taxpayers may carry excess input VAT forward or apply for a refund under the statute.

A brief on China's VAT Law, in force since 1 January 2026: legal basis, statutory rates, the 3% levy rate, small-scale relief through 2027, and what changed for foreign businesses.

October 13, 2026 · Hainan Setup Editorial Team · 6 min read

TL;DR: China’s VAT Law in five points

China’s VAT Law took effect on 1 January 2026. It was adopted by the Standing Committee of the National People’s Congress on 25 December 2024 and replaces the Interim Regulations on Value-Added Tax. Five points matter most for foreign businesses:

A statute, not a set of regulations. The law repealed the interim regulations on the day it took effect. The Implementation Regulation, State Council Order No. 826, took effect on the same date, so VAT now rests on a law, an implementation regulation and supporting documents.
Three statutory rates, plus zero-rating. Article 10 sets rates of 13%, 9% and 6%, with zero-rating for exported goods and specified cross-border services and intangible assets. The 3% levy rate is set separately under Article 11.
Small-scale taxpayers keep the 1% relief through 2027. Under Announcement No. 10 of 2026, the 3% levy rate is reduced to 1% until 31 December 2027. The relief does not cover selling or leasing real estate or transferring land-use rights.
Input VAT on loan interest is still not deductible, for now. Article 21 of the Implementation Regulation keeps interest on loans and directly related fees non-deductible for the time being and asks the finance and tax authorities to review the policy later.
Compliance is more digital. Electronic invoices have the same legal effect as paper VAT invoices (Article 34).

From Interim Regulations to a statute

For three decades, China’s VAT ran on interim regulations, an administrative instrument rather than a law. The VAT Law was adopted on 25 December 2024 and took effect on 1 January 2026, repealing those regulations the same day (Article 38). The Implementation Regulation, issued as State Council Order No. 826, also took effect on 1 January 2026.

The main significance is legal hierarchy. VAT is now governed by a statute passed by the national legislature, an implementation regulation and supporting documents, rather than by a temporary regulation that could be amended at administrative level.

For foreign-invested companies, the change is structural rather than immediate. Rates and filing mechanics did not reset overnight, but the legal basis under them is now more stable, which makes medium-term planning more predictable.

The statutory rates: 13%, 9% and 6%, plus zero-rating

Article 10 of the VAT Law sets three statutory rates and a zero rate:

Rate	Applies to (Article 10)
13%	Sales of goods, processing, repair and replacement services, and tangible movable property leasing; imported goods, unless another band applies
9%	Transport, postal, basic telecom, construction and real-estate leasing services; sales of real estate; transfers of land-use rights; and sales or imports of: agricultural products, edible vegetable oil and edible salt; tap water, heating, cooling, hot water, coal gas, liquefied petroleum gas, natural gas, dimethyl ether, biogas and coal products for household use; books, newspapers, magazines, audio-visual products and electronic publications; feed, fertilisers, pesticides, agricultural machinery and agricultural film
6%	Other services and intangible assets not covered above
0%	Exported goods, unless the State Council provides otherwise; and cross-border sales of services and intangible assets within the scope set by the State Council

The 3% levy rate is separate. Article 11 sets it for simplified calculation, which small-scale taxpayers may use.

Common misreading. Some English-language articles describe China as having “four VAT rates: 13%, 9%, 6% and 0%.” Zero-rating is a treatment for qualifying exports and cross-border supplies, not a bracket a business can choose. It requires the export refund or exemption procedure under Article 33.

The levy rate and small-scale taxpayers: 3%, reduced to 1% through 2027

A taxpayer is small-scale if annual taxable sales do not exceed RMB 5 million (Article 9). The statutory levy rate is 3% (Article 11).

Two reliefs apply under Ministry of Finance and State Taxation Administration Announcement No. 10 of 2026, from 1 January 2026 to 31 December 2027:

3% reduced to 1% for small-scale taxpayers’ taxable transactions, except selling or leasing real estate and transferring land-use rights;
Monthly sales of up to RMB 100,000, or RMB 300,000 per quarter, are exempt. The per-transaction threshold is RMB 1,000. Once the threshold is reached, VAT applies to the full amount (Article 23).

The end date matters. The 1% rate is a transition arrangement, not a permanent feature of the law. For margin or pricing models beyond 2027, use the 3% levy rate as the base case.

A small-scale taxpayer with sound accounting that can provide accurate tax records may register with the tax authority to use the general method instead (Article 9).

FAQ: China VAT Law questions

When did China’s VAT Law take effect?

1 January 2026. It was adopted on 25 December 2024 and repealed the Interim Regulations on Value-Added Tax on the day it took effect.

How many VAT rates does China now have?

Three statutory rates, 13%, 9% and 6%, plus zero-rating for exported goods and specified cross-border services and intangible assets. The 3% levy rate is set separately for simplified calculation. It is not a four-rate system.

Is the 1% rate for small-scale taxpayers still available?

Yes. Under Announcement No. 10 of 2026, the 3% levy rate is reduced to 1% through 31 December 2027 for taxable transactions other than selling or leasing real estate and transferring land-use rights. Monthly sales up to RMB 100,000, or RMB 300,000 per quarter, are exempt over the same period.

Can companies now deduct input VAT on loan interest in China?

Not yet. Article 22 of the VAT Law no longer lists loan services as non-deductible, but Article 21 of the Implementation Regulation keeps input VAT on loan interest and directly related fees non-deductible for the time being, and asks the finance and tax authorities to review the policy later. Treat it as a signal, not a deduction.

What actually changed for foreign companies under the VAT Law?

Four changes are most tangible:

Labour services are no longer a separate category. Processing, repair and replacement services are now listed as services, still at 13%.
The tax-exclusive nature of VAT is written into the law, and VAT must be shown separately on transaction documents (Article 7).
Electronic invoices have the same legal effect as paper invoices (Article 34).
Taxpayers may carry excess input VAT forward or apply for a refund under the statute (Article 21).

Where can I find the operational side of China VAT, such as registration, filing and refunds?

This brief covers the legislation and what changed. VAT registration, invoicing, filing and export refunds are covered in our China VAT guide.

Official sources

This brief is general information as of October 2026, not tax advice for a specific transaction.