BEIJING (Reuters) – China approved on Wednesday a value-added tax law to enter into force on January 1, 2026, bringing together in one document previous regulations that included exempting items from the tax, the Xinhua news agency said.
Official data show that value-added tax, China's largest tax category, accounted for about 38% of national tax revenue in 2023.
The report did not clarify the details of the provisions of the law. The latest project included exemptions for some agricultural products, tools and equipment imported for scientific research and teaching, some imported goods for the disabled, and services provided by care institutions such as nurseries, kindergartens, and nursing for the elderly.
To help a particular sector or business, the government can include new provisions within the scope of tax exemptions.
“With the implementation of the Value-Added Tax Law, 14 of China's 18 tax categories now have their own laws, which covers the majority of tax revenues and represents significant progress in implementing the principle of legal taxation,” Xinhua said.
The law was passed at the end of a session of the Standing Committee of the National People's Congress, China's top legislative body, which began on Saturday.
Last month, China unveiled tax incentives on home and land transactions to support the crisis-hit real estate market. Residents are exempt from VAT when they sell their homes at least two years after purchase.
In September 2023, the Ministry of Finance said it would extend the value-added tax refund policy aimed at encouraging domestic and foreign research institutions to purchase Chinese-made equipment until the end of 2027.
In 2019, China reduced the value-added tax rate on manufacturers to 13% from 16%, and to 9% from 10% for the transportation and construction sectors.
As the world's second-largest economy slows, value-added tax revenues in the first 11 months of this year fell by 4.7% compared to the same period last year to 6.1 trillion yuan ($840 billion), as companies suffered from weak domestic demand. In November, value-added tax revenues increased by 1.36%.
“The VAT rebound reflects improved economic vitality, with sales and business activity recovering,” Tommy Shih, head of Asia macroeconomic research at OCBC, said in a note on Monday. “It may also signal a rebound in industrial profits, further supporting economic momentum.” “. .
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