China’s Ministry of Finance and State Taxation Administration have clarified how taxable sales amounts should be calculated for VAT purposes under the new VAT Law, confirming a net basis of treatment, invoicing restrictions, and deduction limitations across financial transactions, transport services, agency arrangements, and other specified activities.
China’s Ministry of Finance (MoF) and the State Taxation Administration (STA) have issued Announcement No. 12 of 2026 on 30 January 2026, providing detailed clarification on how taxable sales amounts should be calculated for value-added tax (VAT) purposes.
The announcement supports the implementation of the Value-Added Tax Law of China while maintaining existing tax systems and practices.
Financial products: Net basis for VAT calculation
- For transfers of financial products, the taxable sales amount is calculated on a net basis, being the balance between the selling price and the purchase price. Gains and losses from financial instrument transfers may be offset within the same year.
- Any remaining loss may be carried forward to the next tax period, but cannot be carried forward to the next accounting year.
- Taxpayers may apply either the weighted average method or the moving weighted average method to determine purchase prices, and the selected method may not be changed for 36 months.
- Special VAT invoices may not be issued for the transfer of financial products.
Passenger transport station services
For general VAT taxpayers providing passenger transport station services, the taxable sales amount is calculated as the balance of the total tax-inclusive amount received after deducting freight charges paid to carriers. Invoices must be issued for the full amount received, but related input VAT may not be credited.
Air transport enterprises
Air transport enterprises may calculate taxable sales by deducting amounts collected and remitted on behalf of other airlines from total tax-inclusive revenue, ensuring VAT applies only to their own transport services.
Domestic air ticket agency services
- Air transport sales agencies providing domestic air ticket agency services may calculate VAT on a net basis by deducting settlement amounts and related fees paid to air transport enterprises or other sales agents from the total tax-inclusive amount collected from customers.
- Payments to air transport enterprises must be supported by IATA Billing and Settlement Plan (BSP) statements or signed receipts, while payments to other agents must be supported by signed inter-agent receipts.
- Agencies are required to issue electronic invoices (electronic air ticket itineraries) or ordinary invoices to customers for the full tax-inclusive amount.
Overseas flight segment agency services
- Where air transport sales agencies provide agency services for overseas flight segments, the taxable sales amount is calculated as the balance after deducting settlement amounts and related fees paid for overseas segments from the total tax-inclusive amount collected.
- Domestic payments require valid invoices, while overseas payments may be supported by signed receipts, subject to verification.
- Ordinary invoices must be issued to customers for the full tax-inclusive amount.
Overseas examination services conducted in China
- Where overseas entities conduct examinations in China through the National Education Examinations Authority of the Ministry of Education or its affiliated units, the taxable sales amount is calculated after deducting examination fees paid to overseas entities from the total tax-inclusive amount.
- The examination authority or its affiliated units are required to pay VAT under the category of educational auxiliary services.
- Special VAT invoices may not be issued for examination fees collected and remitted to overseas entities, although ordinary invoices may be issued.
Visa agency services
Taxpayers providing visa agency services may calculate taxable sales by deducting visa and authentication fees collected from service recipients and paid on their behalf to the Ministry of Foreign Affairs or to foreign embassies and consulates in China. Special VAT invoices may not be issued for these pass-through fees, but ordinary invoices may be provided.
Goods exempt from import VAT
For goods that are exempt from import VAT, where taxpayers collect payments from principals and remit them on their behalf, the taxable sales amount is calculated as the balance after deducting those pass-through payments from the total tax-inclusive price. Special VAT invoices may not be issued for amounts collected or paid on behalf of clients, although ordinary invoices are permitted.
