Effective 1 January 2026, China’s new VAT regulations raise thresholds for small businesses, extend exemptions for agriculture and essential services, provide targeted relief for technology transfers and strengthen compliance requirements.

RF Report

China’s Ministry of Finance and the State Taxation Administration have jointly released Announcement No. 10 of 2026 on 30 January 2026, introducing a comprehensive framework to ensure a “smooth transition” following the implementation of the Value-Added Tax Law of China.

The new regulations, effective 1 January 2026, focus on reducing the burden for small businesses, supporting the agricultural sector, and fostering social welfare.

Higher thresholds for small-scale taxpayers

In a move to protect micro and small enterprises, the authorities have set generous tax-exempt thresholds for the next two years, which end on 31 December 2027.

  • Monthly sales: Businesses with sales under CHY 100,000 are exempt.
  • Quarterly sales: The exemption applies to totals under CHY 300,000.
  • Per transaction: For those paying on a per-case basis, the limit is CHY 1,000 per day.

Boosting the “green and rural” economy

The announcement clarifies that self-produced agricultural products and essential services—such as irrigation, pest control, and livestock insurance—remain exempt from VAT.

Furthermore, until the end of 2027, the government is extending exemptions to “agricultural production materials,” including:

  • Fertilisers, seeds, and seedlings.
  • Agricultural machinery (including hand tractors).
  • Note: Pet food is explicitly excluded from these exemptions.

Financial markets and global trade

The announcement also covers complex financial transactions to maintain China’s attractiveness to investors. Exemptions continue for:

  • Interbank lending: Interest income from loans between the People’s Bank of China and financial institutions.
  • Cross-border investment: Trading of A-shares via the Shanghai-Hong Kong and Shenzhen-Hong Kong Stock Connects.
  • Logistics: International freight forwarding services, ensuring China’s export competitive edge remains sharp.

Key temporary exemptions (2026–2027)

Sector Exempt item
Agriculture Wholesale/retail of seeds, pesticides, and organic fertilisers.
Tech/IP Technology transfer, R&D services, and individual copyright transfers.
Education University student canteens and dormitory fees.
Finance QFII/RQFII securities trading and national student loan interest.
Logistics Government commodity reserves (grain, edible oil, cotton).