On December 25, 2024, the 13th Meeting of the Standing Committee of the 14th National People's Congress voted to adopt the Value Added Tax Law of the People's Republic of China. As a turnover tax, value-added tax is directly related to the trading activities of market entities and is also a tax type that taxpayers are prone to tax risks due to improper handling in tax treatment. Here, we interpret the key provisions of the Value Added Tax Law through commentary to help readers understand the law.

1、 The legislative evolution of value-added tax

In the early stage of reform and opening up, China piloted the collection of value-added tax in some regions and industries. The draft of the Value Added Tax Regulations of the People's Republic of China was promulgated by the State Council on September 18, 1984 and implemented on October 1 of the same year. In 1993, the State Council formulated the "Interim Regulations on Value Added Tax" to provide regulations on the value-added tax system. In 2008, the State Council revised the "Interim Regulations on Value Added Tax" and implemented the transformation and reform of value-added tax nationwide, transforming production-oriented value-added tax into consumption oriented value-added tax. In 2016, the reform of business tax to value-added tax was fully implemented, and on this basis, the State Council revised the "Interim Regulations on Value Added Tax" in 2017.

In accordance with the reform plan of implementing the principle of taxation legality, the State Council drafted the draft of the VAT Law. After three deliberations by the Standing Committee of the National People's Congress, the VAT Law of the People's Republic of China was passed on December 25, 2024 and will be implemented from January 1, 2026. As the largest tax category in China, VAT has a special law.

2、 Commentary on Key Articles of the Value Added Tax Law

Chapter 1: General Provisions

Article 1: In order to improve the value-added tax system that is conducive to high-quality development, standardize the collection and payment of value-added tax, and protect the legitimate rights and interests of taxpayers, this Law is formulated.

Commentary:

The legislative purpose and principle of "protecting the legitimate rights and interests of taxpayers" is the second substantive tax law to propose this legislative purpose after the Customs Law. As the largest tax category in China, value-added tax (VAT) has one of the legislative purposes of "protecting taxpayers' rights and interests", marking the beginning of China's tax legislation to pay more attention to the protection of taxpayers' legitimate rights and interests. In addition, the role of legislative purpose in tax dispute resolution is that when there are significant differences in the understanding of tax related provisions between the collecting and paying parties, the understanding of legal provisions can be traced back to the legislative purpose (purpose interpretation), and then a beneficial interpretation can be made for taxpayers.

Article 2: The work of value-added tax collection shall implement the Party and the state's line, principles, policies, decisions and deployments, and serve the national economy and social development.

Commentary:

This reflects that the value-added tax work must implement the Party's policies and strategies, and clarifies the status and relationship between policies, laws, and administrative management.

Article 3: Units and individuals (including individual businesses) who sell goods, services, intangible assets, real estate (hereinafter referred to as taxable transactions), and import goods within the territory of the People's Republic of China (hereinafter referred to as the territory) shall be taxpayers of value-added tax and shall pay value-added tax in accordance with the provisions of this Regulation.

Selling goods, services, intangible assets, and real estate refers to the paid transfer of ownership of goods and real estate, the paid provision of services, and the paid transfer of ownership or use rights of intangible assets.

Commentary:

1. Value added tax arises from the trading activities of market entities and is levied on the circulation and transfer of goods, services, intangible assets, and real estate. Therefore, the entire text uses "taxable transactions" instead of "taxable sales behavior" in the Provisional Regulations on Value Added Tax, which is more accurate and consistent with the concept of "transactions" in the Civil Code.

2. The term 'paid' in the second paragraph of this article reflects the essential characteristics of value-added tax.

3. Cancel the "labor" tax item in the "Interim Regulations on Value Added Tax" and merge the "processing, repair and maintenance labor" into the "service" tax item.

Article 4: Taxable transactions occurring within the territory refer to the following situations:

（1） For sales of goods, the place of origin or location of the goods is within the territory;

（2） For the sale or lease of real estate or the transfer of natural resource use rights, the location of the real estate or natural resources shall be within the territory;

（3） For the sale of financial products, the financial products are issued within the country, or the seller is a domestic unit or individual;

（4） Except as provided in the second and third items of this article, for sales of services or intangible assets, the services or intangible assets shall be consumed within the territory, or the sales party shall be a domestic unit or individual.

Commentary:

The current "Notice of the Ministry of Finance and the State Administration of Taxation on Fully Promoting the Pilot Program of Replacing Business Tax with Value Added Tax" (Caishui [2016] No. 36), Annex 1, Article 12, Paragraph 1, stipulates that "domestic sales services refer to the seller or buyer being within the territory", and this article deletes the phrase "the buyer is within the territory". So, regarding the situation where the buyer is within the country and the seller is outside the country, different provisions may be made in the implementation regulations or other specialized legal documents in the future from Annex 1 of Caishui [2016] No. 36.

Article 5: In any of the following circumstances, it shall be deemed as a taxable transaction and value-added tax shall be paid in accordance with the provisions of this Law:

（1） Units and individual businesses use self-produced or commissioned goods for collective welfare or personal consumption;

（2） Units and individual businesses transfer goods free of charge;

（3） Units and individuals transfer intangible assets, real estate, or financial products free of charge.

Commentary:

1. According to Article 4, Paragraph 3 of the current Implementation Rules of the Interim Regulations on Value Added Tax, "Taxpayers who have two or more institutions and implement unified accounting and transfer goods from one institution to another for sale shall also be deemed as sales." For example, there was a case where a certain brand transferred goods between exclusive stores across counties (cities) for sales needs, and the tax authority required it to declare and pay value-added tax based on the provisions of deemed sales. So this time, the "Value Added Tax Law" has deleted the third paragraph of Article 4 of the "Implementation Rules" and will no longer impose taxes on such situations. This will help to connect the internal supply chain of enterprises and reduce their costs.

2. It should be noted that 'providing services without compensation is not classified as equivalent sales', and there is no fallback clause in this clause.

Article 6: Any of the following circumstances shall not be considered as taxable transactions and shall not be subject to value-added tax:

（1） Employees provide services for obtaining wages and salaries for their employing units or employers;

（2） Collecting administrative fees and government funds;

（3） Obtaining compensation for expropriation or requisition in accordance with legal provisions;

（4） Obtain deposit interest income.

Commentary:

Overall, Articles 3, 4, 5, and 6 of this Law are provisions on the scope of value-added tax taxation and are the core elements of this Law. The four situations stipulated in this article do not fall within the scope of value-added tax because they do not belong to business activities. Due to the absence of a fallback clause in this provision, any transaction outside of these four situations may be deemed as a "taxable transaction" in future practice, and taxpayers should pay special attention to it.

Article 7: Value added tax is an additional tax, and the sales amount of taxable transactions does not include the amount of value-added tax. The amount of value-added tax shall be separately listed on the transaction voucher in accordance with the regulations of the State Council.

Commentary:

This article highlights the characteristics of value-added tax (VAT) as an additional tax. This requirement requires the tax amount to be listed in the transaction voucher. The "transaction voucher" itself is not limited to invoices, and the specific type of voucher it includes needs to be further refined by relevant legislation. In many civil and commercial disputes, there have been many controversies between the contracting parties regarding whether the agreed payment for goods is "tax inclusive". After the implementation of this provision, the transaction voucher will separately list the "sales amount" and "tax amount", and both parties to the contract can also directly specify the amount of goods and the value-added tax amount in the contract agreement, which can reduce disputes and controversies.

Article 8: Taxpayers who engage in taxable transactions shall calculate and pay value-added tax in accordance with the general tax calculation method, by offsetting the output tax against the input tax to calculate the taxable amount; Except as otherwise provided in this law.

Small scale taxpayers can calculate and pay value-added tax using a simplified tax calculation method based on sales revenue and collection rate.

The tax calculation method for value-added tax on Sino foreign cooperative exploitation of offshore oil and natural gas shall be implemented in accordance with relevant regulations of the State Council.

Article 9: Small scale taxpayers referred to in this Law refer to taxpayers whose annual taxable sales amount does not exceed 5 million yuan.

Small scale taxpayers with sound accounting and the ability to provide accurate tax information may register with the competent tax authority and calculate and pay value-added tax according to the general tax calculation method stipulated in this law.

In accordance with the needs of national economic and social development, the State Council may adjust the standards for small-scale taxpayers and report them to the Standing Committee of the National People's Congress for the record.

Commentary:

This article raises the standard for small-scale taxpayers from the provisions of the "Notice on Unifying the Standard for Small scale Taxpayers of Value Added Tax" Caishui [2018] No. 33 to legislation. At the same time, the State Council is granted the power to adjust this standard in response to the needs of national economic and social development.

Chapter 2: Tax Rates

Article 10 Value added tax rate:

（1） Taxpayers selling goods, processing, repairing, and repairing services, tangible movable property leasing services, and importing goods, except as provided in the second, fourth, and fifth items of this article, shall be subject to a tax rate of 13%.

（2） Taxpayers selling transportation, postal, basic telecommunications, construction, real estate leasing services, selling real estate, transferring land use rights, selling or importing the following goods, except as provided in the fourth and fifth items of this article, shall be subject to a tax rate of 9%:

1. Agricultural products, edible vegetable oils, and edible salts;

2. Tap water, heating, air conditioning, hot water, coal gas, liquefied petroleum gas, natural gas, dimethyl ether, biogas, residential coal products;

3. Books, newspapers, magazines, audiovisual products, electronic publications;

4. Feed, fertilizers, pesticides, agricultural machinery, and agricultural films.

（3） Taxpayers selling services and intangible assets, except as provided in the first, second, and fifth items of this article, shall be subject to a tax rate of 6%.

（4） Taxpayers exporting goods have a tax rate of zero; Except as otherwise provided by the State Council.

（5） The tax rate for cross-border sales of services and intangible assets within the scope stipulated by the State Council by domestic units and individuals is zero.

Article 11: The applicable simplified tax calculation method shall be used to calculate and pay value-added tax at a rate of 3%.

Article 12: If a taxpayer engages in two or more taxable transactions involving different tax rates and collection rates, the sales amount applicable to different tax rates and collection rates shall be separately calculated; For those not separately accounted for, the higher applicable tax rate shall apply.

Article 13: If a taxpayer engages in a taxable transaction involving two or more tax rates or collection rates, the applicable tax rates or collection rates shall be based on the main business of the taxable transaction.

Commentary:

This chapter maintains the current tax rates of 13%, 9%, and 6%. It should be noted that the provision in Article 10, Paragraph 5, regarding whether zero tax rates apply to the export of services and intangible assets, shall be subject to the specific scope stipulated by the State Council.

Chapter 3: Taxable Amount

Article 14: If value-added tax is calculated and paid according to the general tax calculation method, the taxable amount shall be the balance of the current output tax deducted from the current input tax.

According to the simplified tax calculation method, the taxable amount for paying value-added tax is calculated by multiplying the current sales amount by the tax collection rate.

Imported goods shall be subject to value-added tax calculated by multiplying the taxable price of the composition stipulated in this Law by the applicable tax rate. Formulate the taxable price by adding the tariff and consumption tax to the tariff taxable price; If the State Council has other regulations, follow their regulations.

Commentary:

In line with the Customs Law, the term 'dutiable value of customs duties' will be changed to' taxable value of customs duties'.

Article 15: If overseas units and individuals engage in taxable transactions within the territory of China, the purchaser shall be the withholding agent; Except for those who entrust domestic agents to declare and pay taxes in accordance with the regulations of the State Council.

If the withholding agent withholds and pays taxes on behalf of others in accordance with the provisions of this Law, the amount of tax to be withheld shall be calculated by multiplying the sales amount by the tax rate.

Commentary:

If overseas units and individuals engage in taxable transactions within the country, it is difficult for China to regulate them. Therefore, the first paragraph of this article specifies that the purchaser shall be the withholding agent. This provision helps to enhance the tax authorities' collection and management capabilities in the digital economy and cross-border transactions.

Article 16 The output tax amount refers to the value-added tax amount calculated by multiplying the sales amount by the tax rate stipulated in this Law when a taxpayer engages in taxable transactions.

Input tax refers to the value-added tax paid or borne by taxpayers for the purchase of goods, services, intangible assets, and real estate.

Taxpayers shall offset input tax from output tax by presenting value-added tax deduction vouchers as prescribed by laws, administrative regulations, or the State Council.

Commentary:

This law rephrases the provision in Article 9 of the current "Interim Regulations on Value Added Tax" that "if the obtained value-added tax deduction certificate does not comply with laws, administrative regulations, or relevant provisions of the competent tax department of the State Council, its input tax amount shall not be deducted from the output tax amount" in a reverse and positive manner. The current Article 9 is often applied to the legal basis for taxpayers to obtain unqualified deduction vouchers and be subject to tax treatment by tax authorities. The third paragraph of Article 16 of the Value Added Tax Law has changed this expression to a positive statement, and its original meaning has not changed.

Article 17 Sales revenue refers to the total amount of money obtained by taxpayers from taxable transactions, including both monetary and non monetary forms of economic benefits. It does not include the output tax calculated according to the general tax calculation method and the payable tax calculated according to the simplified tax calculation method.

Commentary:

The concept of sales revenue in Article 6 of the Provisional Regulations on Value Added Tax has been changed from "the total price and additional fees collected" to "the relevant price obtained, including the total price corresponding to monetary and non monetary economic benefits." The open concept of "non monetary economic benefits" is more applicable to the new business models in the digital economy era.

Article 18: Sales revenue shall be calculated in Chinese yuan. Taxpayers who settle sales in currencies other than RMB shall convert them into RMB for calculation.

Article 19: If a taxable transaction as stipulated in Article 5 of this Law occurs and the sales amount is in non monetary form, taxpayers shall determine the sales amount based on market prices.

Commentary:

The expression of "determining sales amount based on market price" is different from Article 16 of the Implementation Rules of the Interim Regulations on Value added Tax, which stipulates that "the sales amount is determined in the order of the average sales price of taxpayers' similar goods, the average sales price of other taxpayers' similar goods in recent times, and the composition of the taxable price", but directly determines "determining sales amount based on market price". This standard is consistent with the "market price" stipulated in the Civil Code and is more in line with the essence of value-added tax as a transaction tax.

Article 20: If the sales amount is significantly lower or higher without justifiable reasons, the tax authorities may determine the sales amount in accordance with the provisions of the Tax Collection and Administration Law of the People's Republic of China and relevant administrative regulations.

Commentary:

1. This article clearly states that when the sales amount needs to be verified, the connection between the substantive and procedural laws of value-added tax shall be achieved based on the Tax Collection and Administration Law. As already stipulated in the Tax Collection and Administration Law, the Value Added Tax Law no longer repeats its provisions, achieving a unified legal system and legislative savings.

2. The addition of "significantly high sales revenue" can also be used to verify sales revenue, in order to avoid taxpayers intentionally raising sales prices and using non compliant methods to obtain improper tax benefits among related parties.

3. The verification subject has been changed from "competent tax authority" to "tax authority", which is more in line with the current functional differentiation between the competent tax bureau and the inspection bureau, that is, the inspection bureau also has the right to conduct verification.

Article 21: If the current input tax exceeds the current output tax, taxpayers may choose to carry it forward to the next period for further deduction or apply for a refund in accordance with the regulations of the State Council.

Commentary:

The legislative purpose and principle of "protecting the legitimate rights and interests of taxpayers" is the second substantive tax law to propose this legislative purpose after the Customs Law. As the largest tax category in China, value-added tax (VAT) has one of the legislative purposes of "protecting taxpayers' rights and interests", marking the beginning of China's tax legislation to pay more attention to the protection of taxpayers' legitimate rights and interests. In addition, the role of legislative purpose in tax dispute resolution is that when there are significant differences in the understanding of tax related provisions between the collecting and paying parties, the understanding of legal provisions can be traced back to the legislative purpose (purpose interpretation), and then a beneficial interpretation can be made for taxpayers.

Article 22: The following input tax amounts of taxpayers shall not be deducted from their output tax amounts:

（1） The input tax amount corresponding to the taxable items using the simplified tax calculation method;

（2） The input tax amount corresponding to the exempted value-added tax items;

（3） Input tax amount corresponding to abnormal loss items;

（4） The input tax corresponding to goods, services, intangible assets, and real estate purchased and used for collective welfare or personal consumption;

（5） The input tax corresponding to catering services, daily resident services, and entertainment services purchased and directly used for consumption;

（6） Other input tax amounts stipulated by the State Council.

Commentary:

1. The Notice of the Ministry of Finance and the State Administration of Taxation on Fully Promoting the Pilot Program of Replacing Business Tax with Value added Tax "(Caishui [2016] No. 36, Attachment 1, Article 27) clearly states that" the input tax of loan services shall not be deducted ". This provision has been deleted, which means that the input tax of value-added tax on loan interest can be deducted after the implementation of this law. This will significantly reduce the borrowing cost of enterprises, improve the efficiency of fund circulation within the group, and have a huge impact on the financial market.

2. The sixth paragraph of Article 27 in Attachment 1 of Caishui [2016] No. 36, which states that "input tax on purchased catering services, daily services for residents, and entertainment services shall not be deductible", has been changed to "input tax on purchased catering services, daily services for residents, and entertainment services directly applied to consumption shall not be deductible", and the limitation of "and directly applied to consumption" has been added. That is to say, if taxpayers purchase the above-mentioned services for business arrangements related to production and operation, they have the right to input deduction. Therefore, when using such input invoices for deduction, taxpayers should pay attention to retaining evidence to prove that the services corresponding to the invoice have reasonable business arrangements.

Chapter 4: Tax Preferential Treatment

Article 23: Small scale taxpayers who engage in taxable transactions and whose sales amount does not reach the threshold shall be exempt from value-added tax; If the threshold is reached, the full amount of value-added tax shall be calculated and paid in accordance with the provisions of this law.

The standards for the threshold points specified in the preceding paragraph shall be formulated by the State Council and reported to the Standing Committee of the National People's Congress for the record.

Article 24: The following items are exempt from value-added tax:

（1） Self-produced agricultural products sold by agricultural producers, agricultural machinery cultivation, irrigation and drainage, pest and disease control, plant protection, agricultural and animal husbandry insurance, and related technical training services, breeding and disease prevention of poultry, livestock, and aquatic animals;

（2） Medical services provided by medical institutions;

（3） Old books, items sold by natural persons who have used them themselves;

（4） Imported instruments and equipment directly used for scientific research, scientific experiments, and teaching;

（5） Imported materials and equipment provided free of charge by foreign governments and international organizations;

（6） Goods imported directly by organizations of persons with disabilities for the exclusive use of persons with disabilities, and services provided by individuals with disabilities;

（7） Nurturing services provided by daycare centers, kindergartens, elderly care institutions, and disability service institutions, marriage introduction services, and funeral services;

（8） Academic education services provided by schools and services provided by students' work study programs;

（9） Ticket revenue for cultural activities held in memorial halls, museums, cultural centers, management agencies of cultural relics protection units, art galleries, exhibition halls, painting and calligraphy institutes, and libraries, as well as ticket revenue for cultural and religious activities held in religious venues.

The specific standards for the tax-free items specified in the preceding paragraph shall be formulated by the State Council.

Commentary:

The statutory tax-free items have significantly increased compared to Article 15 of the Provisional Regulations on Value added Tax (the horizontal line represents the addition). As can be seen, this article has removed the provision that exempts "contraceptive drugs and devices" from value-added tax, and added marriage introduction services as an exempt value-added tax item, which is in line with the current policy of encouraging childbirth.

Article 25 In accordance with the needs of national economic and social development, the State Council may formulate special preferential policies for value-added tax for supporting the development of small and micro enterprises, supporting key industries, encouraging innovation, entrepreneurship and employment, and donating public welfare undertakings, and report them to the Standing Committee of the National People's Congress for the record.

The State Council should timely evaluate and adjust the preferential policies for value-added tax.

Commentary:

1. This clause is a newly added provision. This regulation transforms short-term policy incentives into long-term statutory special incentives, which can enhance the predictability of future development for business entities and effectively stimulate market vitality.

2. This provision grants the State Council the power to timely evaluate and adjust tax preferential policies, which helps the State Council make adaptive adjustments based on new market changes and reflects the efficiency principle that taxation should be adapted to the development of the market economy.

Article 26: If a taxpayer concurrently operates value-added tax preferential projects, the sales amount of the value-added tax preferential projects shall be separately accounted for; Items that are not separately accounted for shall not enjoy tax incentives.

Article 27 Taxpayers may waive value-added tax incentives; Those who give up the preferential treatment shall not enjoy the tax benefit within 36 months, except for small-scale taxpayers.

Commentary:

After small-scale taxpayers give up value-added tax incentives, they will no longer be subject to the 36 month limit. This regulation is more effective for taxpayers and will encourage and promote entrepreneurship.

Chapter 5: Collection and Management

Article 28: The time of occurrence of value-added tax obligations shall be determined in accordance with the following provisions:

（1） When a taxable transaction occurs, the tax obligation arises on the day when the sales proceeds are received or the receipt of sales proceeds is obtained; If an invoice is issued first, it shall be issued on the same day as the invoice is issued.

（2） When a deemed taxable transaction occurs, the tax obligation arises on the day the deemed taxable transaction is completed.

（3） The tax obligation for imported goods occurs on the day when the goods are declared for import.

The time when the value-added tax withholding obligation occurs is the day when the taxpayer's value-added tax payment obligation occurs.

Commentary:

1. Compared to Article 19 of the Provisional Regulations on Value Added Tax, this article adds the issue of determining the time of occurrence of tax obligations for transactions deemed taxable.

2. In a previous case, the parties to a contract transaction did not agree on a payment date in the contract. According to Article 38 (3) of the Implementation Rules of the Provisional Regulations on Value added Tax, the tax authorities believed that "if there is no written contract or a written contract does not agree on a payment date, the day the goods are shipped shall be recognized as the time when the value-added tax obligation occurs, and the date of issuing the invoice or receiving the sales payment shall not be used as the date of tax obligation occurrence." In the future formulation of the implementation regulations of the value-added tax law, this issue should be further clarified and adapted to this article to avoid tax disputes.

Article 29: The place of value-added tax payment shall be determined in accordance with the following provisions:

（1） Taxpayers with fixed production and business premises shall declare and pay taxes to the competent tax authority in the place where their institution is located or where they reside. If the head office and branch office are not located in the same county (city), they shall declare and pay taxes separately to the competent tax authorities in their respective locations; With the approval of the financial and tax authorities at or above the provincial level, the head office may consolidate and declare taxes to the competent tax authority in the location of the head office.

（2） Taxpayers without a fixed place of production and operation shall declare and pay taxes to the competent tax authority in the place where their taxable transactions occur; For those who have not declared and paid taxes, the competent tax authority in the place where their institution is located or where they reside shall collect the taxes.

（3） Natural persons who sell or lease real estate, transfer the right to use natural resources, or provide construction services shall declare and pay taxes to the competent tax authorities in the place where the real estate is located, where the natural resources are located, or where the construction services occur.

（4） Taxpayers of imported goods shall declare and pay taxes at the location specified by the customs.

（5） The withholding agent shall declare and pay the withheld tax to the competent tax authority in the place where its institution is located or where it resides; If the institution is located or resides overseas, it shall declare and pay the withheld tax to the competent tax authority in the place where the taxable transaction occurs.

Commentary:

1. Upgrade the relevant provisions of Article 46 of Annex 1 of the current Notice of the Ministry of Finance and the State Administration of Taxation on Fully Promoting the Pilot Program of Replacing Business Tax with Value Added Tax (Caishui [2016] No. 36) into law.

2. If the institution is located or resides overseas, it shall declare and pay the withheld tax to the competent tax authority in the place where the taxable transaction occurs

3. Article 22 of the current Provisional Regulations on Value Added Tax stipulates that "with the approval of the financial and tax authorities under the State Council or their authorized financial and tax authorities, the head office may consolidate and declare taxes to the competent tax authorities in the location of the head office." However, the first paragraph of this article directly defines "authorization" as "approval by the financial and tax departments at or above the provincial level. This change reflects the protection of taxpayers' rights and interests. In the case of "authorization", there is a possibility of a department with a lower authorization level. This clause directly specifies "provincial-level or above" to make practical operations more clear and ensure the lowest level of provincial-level.

Article 30: The taxable periods for value-added tax are ten days, fifteen days, one month, or one quarter, respectively. The specific tax period for taxpayers shall be determined by the competent tax authority based on the size of the taxpayer's taxable amount. Taxpayers who do not frequently engage in taxable transactions may pay taxes on a per transaction basis.

Taxpayers who use one month or one quarter as a tax calculation period shall declare and pay taxes within fifteen days from the expiration date; For tax periods of ten or fifteen days, tax declaration and payment shall be made within fifteen days from the first day of the following month.

The tax calculation period and declaration period for withholding agents to release and pay taxes shall be implemented in accordance with the provisions of the preceding two paragraphs.

Taxpayers importing goods shall declare and pay taxes within the time limit prescribed by the customs.

Commentary:

1. Replace the term 'tax payment period' in Article 23 of the Provisional Regulations on Value Added Tax with 'tax calculation period'.

2. The deadline for declaring and paying taxes on imported goods as stipulated in Article 24 of the Provisional Regulations on Value Added Tax shall be changed to "declare and pay taxes within the time limit prescribed by the customs

Article 31: Taxpayers who use ten or fifteen days as a tax calculation period shall prepay taxes within five days from the expiration date.

If laws and administrative regulations have other provisions for taxpayers to prepay taxes, those provisions shall prevail.

Article 32: Value added tax shall be collected by the tax authorities, and the value-added tax on imported goods shall be collected by the customs on behalf of them.

The customs shall provide information on the collection of value-added tax and export declaration of goods to the tax authorities.

Measures for the calculation and collection of VAT on articles carried or posted into China by individuals shall be formulated by the State Council and submitted to the Standing Committee of the National People's Congress for the record.

Commentary:

This provision is in line with the provisions of the Customs Law. The customs shall provide information on the collection of value-added tax and export declaration of goods to the tax authorities.

Article 33: Taxpayers who export goods or sell services or intangible assets across borders and are subject to zero tax rates shall apply for tax refunds (exemptions) to the competent tax authorities. The specific measures for export tax refund (exemption) shall be formulated by the State Council.

Commentary:

This article specifies that the method for export tax rebate shall be formulated by the State Council. The current documents on export tax rebates are mainly regulated by the Ministry of Finance and the State Administration of Taxation. In the future, the State Council will introduce specific measures, and the corresponding legislative level will be raised.

Article 34 Taxpayers shall issue and use value-added tax invoices in accordance with the law. Value added tax invoices include paper invoices and electronic invoices. Electronic invoices have the same legal effect as paper invoices.

The country actively promotes the use of electronic invoices.

Commentary:

This article adds electronic invoices, which is in line with the current tax collection and management model based on data. Promoting electronic invoices is beneficial for enhancing transaction convenience, cracking down on tax violations, and improving tax collection and management capabilities.

Article 35: Tax authorities shall establish value-added tax related information sharing mechanisms and work cooperation mechanisms with departments such as industry and information technology, public security, customs, market supervision and management, the People's Bank of China, and financial supervision and management.

Relevant departments shall, in accordance with laws and administrative regulations, support and assist tax authorities in carrying out value-added tax collection and management within their respective responsibilities.

Commentary:

Increasing the information sharing mechanism between the tax department and other departments, as well as the cooperation mechanism among multiple departments, is more conducive to strengthening taxpayers' compliance with tax laws, enhancing the tax collection and management capabilities of tax authorities, and cracking down on tax related illegal and criminal activities in accordance with the law.

Article 36: The collection and management of value-added tax shall be carried out in accordance with the provisions of this Law and the Tax Collection and Management Law of the People's Republic of China.

Article 37: Taxpayers, withholding agents, tax authorities and their staff who violate the provisions of this Law shall be held legally responsible in accordance with the provisions of the Tax Collection and Administration Law of the People's Republic of China and relevant laws and administrative regulations.

Chapter 6 Supplementary Provisions

Article 38: This Law shall come into effect on January 1, 2026. The Provisional Regulations of the People's Republic of China on Value Added Tax shall be abolished simultaneously.

3、 Summary

As the largest tax category in China, the completion of the legislative work of value-added tax marks an important progress in fully implementing the principle of tax legality in China. Of course, the introduction of the Value Added Tax Law is only the first step in building a legal system for value-added tax. China's value-added tax legal system will be an organic and unified whole led by law, with administrative regulations, rules, and tax normative documents as important components. It is worth noting that during the National Tax Work Conference held in Beijing from January 15th to 16th, 2025, it was explicitly stated that the implementation regulations of the Value Added Tax Law should be urgently introduced. We look forward to the early improvement of the value-added tax legal system.