China will require domestic businesses to withhold and remit VAT on certain services purchased from individual contractors from 1 November 2026, with new filing, record-keeping and reporting obligations.
China’s Ministry of Finance and State Taxation Administration released Announcement No. 28 of 2026 on 3 September 2026, introducing mandatory VAT withholding requirements for businesses that purchase services from individual contractors.
Starting 1 November 2026, domestic entities must withhold and remit value-added tax on behalf of these service providers in specific circumstances.
The rule applies when a single transaction or daily sales reach the CNY 1,000 threshold set by Announcement No. 10 of 2026. Businesses acting as withholding agents calculate the tax by multiplying the sales amount by the prescribed collection rate. If the service provider holds valid VAT exemptions or qualifications for preferential treatment, they must provide supporting documents to the withholding agent.
Which services require withholding
Seven service categories fall under the new rule. These are research and development, software development, design, consulting, radio and television production, cultural services, and education services. One major exception exists: when an internet platform company manages VAT filing and payment for workers using its platform, the purchasing entity does not withhold. This exemption applies where existing platform provisions already address tax obligations.
Filing obligations and timelines
Withholding agents must remit withheld VAT by the 15th of the month following the transaction. Surtaxes and related fees are withheld together with the VAT amount. Even when transactions fall below the threshold or qualify for exemptions, agents must still file a declaration with tax authorities.
The withholding agent must keep complete records including transaction details, individual identification, withholding documentation, and proof of any VAT preferences. Identity information and preference eligibility materials must remain confidential.
Between 1 January 2026 and 31 October 2026, individual service providers must independently declare and pay VAT under Article 44 of the VAT Implementing Regulations.
The State Taxation Administration released Announcement No. 19 of 2026 on 4 September 2026 with the required reporting form and supporting guidance.
