Last December, Chinese lawmakers made a significant stride in the realm of legal taxation by voting to enact a law governing value-added tax (VAT), which stands as the largest tax category in the country. This landmark decision aligns with ongoing efforts to institute a law-based taxation framework.
The law was ratified during a session of the Standing Committee of the National People’s Congress, the nation’s top legislative body. It is set to take effect on January 1, 2026. At present, legislation has been established for 14 of the 18 tax categories currently operational in China, which collectively represent the vast majority of the nation’s tax revenue.
In recent years, the Chinese government has been steadfast in its efforts to reform the fiscal and tax system, implementing a variety of VAT reforms designed to create a more modern and efficient VAT system at a rapid pace. Li Xuhong, vice president of the Beijing National Accounting Institute, emphasized the importance of this new VAT law.
He noted that its adoption solidifies the successes achieved through recent VAT reforms, enhancing the reliability of the tax system while fostering stability and confidence among taxpayers. He described it as a significant milestone in the broader endeavor to advance fiscal and tax system reforms in China. In terms of financial impact, VAT revenues in China have soared to 6.12 trillion yuan (approximately 851.56 billion U.S. dollars) during the first eleven months of this year, constituting roughly 37.8 percent of the country’s total tax revenue.
Li further underscored that a swifter approach to tax legislation is key to refining the business environment and underpinning the nation’s commitment to high-quality development.
