Chinese VAT returns

VAT payments are due on the same date as the VAT return filing deadline — the 15th day of the month following the end of the reporting period. Late payments are subject to a daily surcharge of 0.05% of the unpaid tax amount, accruing from the date the payment was due.

Input VAT may generally be reclaimed by general taxpayers on goods and services used for taxable business activities, provided valid VAT deduction vouchers — typically a special VAT fapiao verified through the STA’s electronic invoicing system — are held. Deductible input VAT includes:

• Goods purchased for resale or use in taxable production
• Capital assets, fixed assets, and business equipment
• Services, utilities, and overhead costs directly related to taxable activities
• Import VAT on goods used in taxable supplies
• Loan services (under the 2026 VAT Law, input VAT on loan services is no longer categorically excluded from deduction)
• Pro rata deductions for mixed-use expenses where permitted

Input VAT is not deductible on:

• Items used for VAT-exempt activities or activities subject to the simplified taxation method
• Goods or services used for collective welfare or personal consumption
• Catering, daily resident services, and entertainment services purchased and directly used for personal consumption
• Goods subject to abnormal losses
• Other categories specified by the State Council

Small-scale taxpayers cannot claim input VAT credits and must treat all VAT incurred on purchases as a business cost.

All Chinese VAT returns must be submitted electronically through the STA’s Electronic Tax Bureau platform using the taxpayer’s registered credentials. In-person filing at a tax service hall is also available in most jurisdictions but electronic filing is standard practice.

VAT payments are made via bank transfer to the designated account of the relevant tax authority, or directly through the Electronic Tax Bureau’s integrated payment function.

Penalties may apply for VAT noncompliance, including:

• Late filing penalties for overdue VAT returns — a fine of up to RMB 2,000 per late return; up to RMB 10,000 in serious cases
• A daily surcharge of 0.05% of unpaid VAT for late payments, accruing from the due date
• Penalties for incorrect, incomplete, or misleading VAT returns
• Fines of up to RMB 500,000 and potential criminal liability for issuing false or fraudulent fapiao (VAT invoices)
• Fines of 50% to 500% of unpaid tax in cases of deliberate tax evasion, plus recovery of the evaded tax with late payment surcharges, and potential criminal prosecution
• Additional sanctions in cases of repeated noncompliance, including enhanced audits and restrictions on export VAT refund eligibility

The STA publishes guidance on applicable penalty rates and enforcement procedures, which may change over time.

If input VAT exceeds output VAT for a given reporting period, the resulting VAT credit may be:

• Carried forward to offset future VAT liabilities (with no statutory time limit on the carry-forward), or
• Refunded by the State Taxation Administration, subject to statutory conditions and review.

Excess input VAT refund claims are subject to review by the STA and relevant local tax bureau. The 2026 VAT Law formally codifies the taxpayer’s right to choose between carry-forward and refund, providing greater certainty than under the previous regulatory framework. Processing times may vary depending on the taxpayer’s compliance history, the size of the refund claim, and coordination between tax and customs authorities where export transactions are involved.