Chinese VAT rates
China has three standard rates of value added tax (VAT). These are 13%, 9%, and 6%. There is also a nil rating for some goods and services, as well as a number of exemptions in China.
VAT was introduced in China in 2016 as part of national tax reforms, and effectively replaced business tax (BT) that had applied to a number of industries. The reforms were part of China’s efforts to restructure its economy from labour-intensive manufacturing to service-oriented.
VAT taxpayers
The Chinese VAT system includes two types of VAT taxpayers — general and small scale. Businesses with an annual taxable sales turnover exceeding RMB 5 million must apply for general taxpayer status. Businesses with an annual taxable sales turnover below RMB 5 million should apply for small-scale taxpayer status.
The VAT rate for small-scale taxpayers is 3%.
The Chinese VAT system is applicable in mainland China only. Hong Kong and Macau are therefore excluded from the Chinese system.
China value added tax rates
Tax on luxury items
A tax on luxury (non-essential or resource-intensive) items in China is a combination of VAT, consumption tax, and import duties. The rates are determined by the product, and can vary from 1–56%. The range of goods includes alcohol, cosmetics, fuel oil, jewellery, motorcycles, motor vehicles, petrol, yachts, golf products, and luxury watches.
The tax is calculated based on the sales value or volume of the goods. It’s levied on businesses that manufacture, import, or sell them.
China VAT exemptions
A number of goods and services are exempt from VAT in China. These include secondhand goods, most agricultural services, contraception, childcare and educational services offered by childcare centres, nursing care services provided by nursing homes, and for disabled persons, funeral services, medical services from medical institutions, certain educational services, ticket revenues from cultural and religious events, and sales of self-built homes for personal use.
Zero rated goods and services in China
International supplies that are zero rated for VAT in China include cross-border sales of services, intangible assets, research and development services, software services business process management services, offshore outsourcing, design services, radio, film, and television production services, and certain international transportation services.
Registering for VAT in China
As of 2023, the threshold for VAT registration in China increased from RMB 30,000 to RMB 100,000. Once registered, VAT taxpayers must submit regular VAT returns and maintain proper records of VAT payments.
Businesses in China will need to register for VAT if they:
- Import products into China
- Manufacture items in China
- Process or modify products in China
- Produce certain products that China exports
China VAT registration procedure
Businesses must provide a certificate of incorporation and the articles of association when registering for VAT in China. Other documents may be requested by tax authorities. Overseas businesses may be required to appoint a legal representative. If the registration for VAT is completed successfully, a VAT certificate from the financial authorities in China will be issued to the business.
VAT returns
The tax authorities in China will determine a business’s tax payment deadline based on the amount of tax payable. VAT payment deadlines can be set at a range of every 1–15 days, monthly, or quarterly.
When filing returns every 1–15 days, businesses should pre-pay tax within five days of the tax payment period’s expiration date. They should file a tax return and make tax payments within the first 15 days of the following month and settle the tax amount payable for the preceding month.
When filing returns monthly or quarterly, businesses must make VAT payments within 15 days of the tax payment period’s expiration date.
VAT for overseas businesses in China
Of the two kinds of taxpayers in China — general and small scale — foreign businesses selling into the country are typically deemed as general taxpayers. They are subject to a standard VAT rate of 17%.
Overseas businesses must calculate, report, and pay VAT to the Chinese authorities and ensure they follow all relevant VAT regulations.
Other resources
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