Chinese VAT rates and VAT compliance

VAT in China is administered by the State Taxation Administration (STA).

China applies a three-tier standard VAT rate structure alongside a zero rate for exports and a simplified rate for small-scale taxpayers.

Some supplies are exempt from VAT in China. These commonly include:
 

• Sale of self-produced agricultural products by agricultural producers
• Medical services provided by qualified medical institutions
• Education and vocational training services provided by qualified schools and institutions
• Childcare services provided by nurseries and kindergartens
• Technology transfer, technology development, and related technical consulting and services (currently exempt until December 31, 2027)
• Cultural and religious activities conducted by approved institutions
• Funeral and eldercare services
• Financial services in certain circumstances (including certain direct-charge financial services provided to overseas entities)
• Residential rental of immovable property by individuals

Exempt supplies do not generate output VAT and generally do not allow recovery of input VAT related to those activities.

VAT registration is required for businesses carrying out taxable activities in China.

Chinese-established businesses must register for VAT upon incorporation. Businesses with annual taxable sales of RMB 5 million or more are classified as general taxpayers; those below this threshold are classified as small-scale taxpayers and may qualify for VAT exemption if monthly sales do not exceed RMB 100,000.

Non-established (foreign) businesses cannot register for VAT directly as nonresident traders. Foreign businesses making taxable supplies in China must generally establish a Chinese legal entity — such as a Wholly Foreign-Owned Enterprise (WFOE) — through which VAT registration is then obtained. For cross-border services supplied into China by foreign businesses without a local entity, the Chinese purchaser is typically the withholding agent.

Get more information on VAT registration in China.

VAT-registered businesses in China must file periodic VAT returns. Filing frequency is typically:
 

• Monthly: Required for general taxpayers (annual taxable sales of RMB 5 million or more).
• Quarterly: The default for small-scale taxpayers, with an option to elect monthly filing.

Returns include output VAT on sales and, for general taxpayers, recoverable input VAT on purchases supported by verified VAT deduction vouchers. Small-scale taxpayers file simplified returns without input VAT credits.

All filings are submitted electronically through the State Taxation Administration’s Electronic Tax Bureau platform.

Get more information on VAT returns in China.

Foreign businesses storing goods in China must consider VAT registration obligations if those goods are held for domestic sale.

Holding inventory within mainland China for resale typically requires the foreign business to establish a Chinese legal entity and register for VAT. Importing goods into China may also trigger VAT obligations, particularly where the foreign business acts as importer of record at customs clearance. Special rules apply to cross-border ecommerce platforms and bonded warehouse arrangements used by foreign sellers, where customs and VAT treatment depends on the specific import model used (B2C direct shipping, bonded warehousing, or general trade importation).

VAT is generally payable on the importation of goods into China.

• Import VAT is due at customs clearance and is calculated on the composite taxable price — the customs value (CIF: cost, insurance, and freight) plus applicable customs duty and, where relevant, consumption tax.
• The standard import VAT rate is 13%, applying to most goods. A reduced rate of 9% applies to qualifying goods including agricultural products, books, newspapers, utilities, and certain other specified categories.
• VAT-registered general taxpayers may recover import VAT as input VAT, provided the goods are used for taxable activities and the relevant customs import declaration serves as the VAT deduction voucher.
• Import VAT on goods used for VAT-exempt activities or personal consumption is not recoverable.

Foreign businesses supplying digital services — including software, online platforms, telecommunications, broadcasting, and electronically supplied content — to recipients in China are subject to Chinese VAT obligations.

China does not currently operate a simplified foreign supplier registration regime equivalent to the EU VAT One-Stop Shop. For B2B supplies of digital services, the Chinese purchaser is generally designated as the withholding agent responsible for accounting for and remitting VAT to the STA. For B2C digital services supplied directly to Chinese consumers by foreign businesses without a Chinese entity, VAT obligations depend on the business model and may require the establishment of a local entity or the appointment of a domestic agent.

The standard VAT rate applicable to digital and electronically supplied services varies depending on the nature of the service:
 

• Value-added telecommunications and internet services: 6%
• Basic telecommunications: 9%

VAT-registered general taxpayers in China may recover input VAT incurred on taxable business expenses through their VAT returns by offsetting input VAT against output VAT. Recovery requires verified VAT deduction vouchers — typically a special VAT fapiao confirmed through the STA’s Golden Tax electronic invoicing system.

China does not operate an EU-style nonresident VAT refund scheme. Foreign businesses not established in China generally cannot recover Chinese input VAT without first establishing a local entity and registering for VAT.

China applies zero-rating to qualifying exports of goods and to certain cross-border services and intangible assets consumed entirely outside China. Zero-rating allows VAT to be charged at 0% while preserving the right to recover related input VAT through the export VAT refund system, provided documentary and procedural requirements are met.

Qualifying zero-rated cross-border services include R&D services, software services, technology transfer, design services, and other qualifying modern services supplied to overseas entities and consumed entirely overseas. Export VAT refund applications are subject to review by the STA in coordination with customs authorities and must be filed within the prescribed time limit; late filing may result in the transaction being assessed as a domestic taxable supply.

Businesses must issue VAT-compliant fapiao (invoices) that include:

• Supplier and buyer name and Unified Social Credit Code (USCC)
• Description of goods or services
• Quantity and unit price 
• VAT rate and VAT amount (itemised separately from the price) 
• Invoice number and date

China operates a mandatory real-time electronic invoicing system — the Golden Tax system (金税工程) — through which all fapiao must be issued and verified. As of 2024, fully digitised electronic fapiao (全面数字化的电子发票) are standard across China, replacing paper VAT invoices. The STA has direct visibility into invoice data through this system, supporting real-time tax administration and audit.

Time-of-supply rules:
 

• Goods: VAT generally becomes chargeable when the goods are delivered, when the fapiao is issued, or when payment is received — whichever occurs first.
• Services: VAT is generally due when the service is completed or when the fapiao is issued, whichever occurs first.
• Imports: VAT is due at customs clearance.

VAT records — including fapiao, accounting books, and supporting documentation — must generally be retained for a minimum of 10 years. VAT returns and payments are due by the 15th day of the month following the end of the reporting period (monthly or quarterly, depending on taxpayer classification).

In addition to VAT, businesses operating in China may be subject to a range of other indirect taxes and surcharges. These are typically assessed and reported alongside VAT obligations.

Consumption Tax (消费税) is levied on the manufacture or importation of specific categories of goods in China. It applies at the point of production or import — not at each stage of the supply chain as VAT does — and is borne by the manufacturer or importer rather than passed through the chain as a separately stated charge.

Goods subject to Consumption Tax include:
 

• Tobacco and tobacco products
• Alcohol and alcoholic beverages
• Cosmetics and high-end beauty products
• Luxury goods including high-end watches, jewellery, and golf equipment
• Petrol, gasoline, diesel, and related fuels
• Cars and other motor vehicles
• Motorcycles
• Yachts

Rates vary by category and may be applied on an ad valorem basis (as a percentage of value), a specific basis (per unit), or a combination of both. Consumption Tax paid on imported goods forms part of the customs taxable value and affects the base on which import VAT is calculated.

Three surcharges are levied as a percentage of a business’s VAT liability (and Consumption Tax liability, where applicable). These are commonly referred to as VAT surcharges and are reported and paid alongside VAT returns.

A 3% surcharge levied on the amount of VAT paid (plus Consumption Tax paid, where applicable). It is designed to fund national education expenditure.

A further 2% surcharge on the same base (VAT paid plus Consumption Tax paid, where applicable). This funds local and regional education spending.

A surcharge on the amount of VAT paid (plus Consumption Tax paid, where applicable), with the rate determined by the location of the taxpayer’s registered operations:
 

• 7% — urban districts of cities
• 5% — counties and towns 
• 1% — other areas

These three surcharges are calculated on the actual VAT and Consumption Tax remitted for the period. They do not apply to Business Tax, which was abolished as part of China’s VAT reform in May 2016 and no longer forms part of the surcharge base. Businesses should factor these surcharges into their overall indirect tax cost calculations when assessing the tax burden of Chinese operations.