The State Taxation Administration. Photo: VCG

China on Tuesday released the implementing regulations for its law on value-added tax (VAT), detailing operational tax rules ahead of the law's 2026 rollout, which authorities said will help promote fair competition and support the development of a unified national market.

The regulations, which comprise six chapters and 54 articles, set out concrete provisions on tax rates, taxable transactions, incentives and administration. They will take effect on January 1, 2026, at the same time as the VAT law, according to China's State Taxation Administration (STA).

Industry observers noted that the implementing regulations play a key role in upholding the principle of statutory taxation, giving effect to legislative authorization and strengthening protections for taxpayers' rights and interests, providing strong support for the smooth rollout of the VAT law, according to Xinhua.

The document provides clearer definitions of taxable transactions under the VAT law, specifying the scope and applicable scenarios for goods, services, intangible assets and immovable property. It also refines rules on preferential policies, including eligibility for zero-rated VAT on certain export goods, as well as the conditions under which cross-border sales of services and intangible assets may qualify for the zero rate.

In addition, the regulations further standardize VAT deduction practices by clarifying the types of eligible deduction vouchers and the methods for deducting input VAT. They also spell out detailed criteria for VAT exemption items stipulated in the law.

Deduction mechanisms are widely regarded as the backbone of the VAT system, as they help ease the tax burden on businesses. The new regulations represent a further step toward refining these rules and enhancing their operability, according to Xinhua.

As China's largest tax category, VAT applies to the vast majority of market entities and has a direct bearing on everyday economic activity. 

On Tuesday, the Ministry of Finance (MOF) also released a related statement on VAT treatment for residential property transactions. Individuals who sell residential properties they have owned for two years or more will be exempt from value-added tax. The policy will also take effect on January 1, 2026.

The implementing regulations will help ensure consistent and effective enforcement of the VAT law nationwide, promote fair competition and support the development of a unified national market, officials from the Ministry of Justice, MOF and STA said in a statement on Tuesday when answering media questions on the regulations, per CCTV News. 

By providing clearer and more detailed rules, the regulations are also expected to help stabilize market expectations and support efforts to build a market-oriented, law-based and internationally competitive business environment, per the statement.

Chinese lawmakers in December 2024 voted to adopt the VAT law, the largest tax category in China, marking major progress in enforcing the principle of law-based taxation, Xinhua reported.

Global Times