The 13th Session of the 14th National People’s Congress Standing Committee has reviewed and approved the draft of the Value-Added Tax (VAT) Law of China.

This legislation, which marks the introduction of China’s first VAT Law, is set to take effect on 1 January 2026, replacing the Provisional VAT Regulations that have been in place for 31 years. It aligns with the principles of preserving the existing VAT structure and ensuring that overall tax obligations remain stable. Consequently, VAT rates and other essential components will continue to be in accordance with the current system.

VAT is the primary source of tax revenue in China. It represents the largest tax category. As reported by the Ministry of Finance, domestic VAT revenue reached approximately RMB 6.9 trillion in 2023, which constituted around 38% of the total national tax revenue.

With more than 60 million VAT taxpayers and its applicability to goods, services, and real estate, VAT exerts a direct influence on both businesses and consumers. This extensive relevance has made the legislative process a significant concern for both policymakers and the general public. This development enhances the certainty and stability of VAT policies, providing a more robust legal framework for the VAT system.

The Ministry of Finance and the State Taxation Administration made the Draft VAT Law (Draft for Comments) available to the public on 27 November 2019. The National People’s Congress Standing Committee undertook two reviews of the Draft VAT Law in December 2022 and August 2023. A meeting of the Standing Committee was convened from 21 – 25 December 2024 to conduct a third review of the Draft. The Draft was further amended and ultimately enacted as the VAT Law.