Issued by:Ministry of Finance State Taxation Administration

Issue No.:No. 13, 2026 of the Announcement of Ministry of Finance and the State Administration of Taxation

Release Date:January 30, 2026

Effective Date:January 1, 2026

Links:https://fgk.chinatax.gov.cn/zcfgk/c102416/c5247494/content.html

This announcement, based on the VAT of the People's Republic of China and its implementation regulations, continues the current system and practices while clarifying and refining matters related to input tax credits for VAT. Its main contents are as follows:

• Regarding Input Tax Credit Rules:

1. 1）Clarified the types of deduction vouchers required and the standards for determining input tax credits in scenarios such as motor vehicle procurement, domestic passenger transportation services, and road, bridge, and lock passage services.
2. 2）When general taxpayers purchase goods (excluding fixed assets) or services that cannot be allocated for input tax credit deduction due to mixed use, the non-deductible input tax for the current period shall be calculated using the following formula:
3.       Total distributable input tax for the period × [(Sales from projects subject to the simplified tax computation method + Sales from VAT-exempt projects + Non-taxable transaction income not eligible for deduction) ÷ (Total sales + Total non-taxable transaction income)]
4. 3）Compared to the original regulations, this formula newly incorporates “non-deductible non-taxable transactions,” which are classified as one category of non-deductible projects alongside projects subject to the simplified tax computation method and VAT-exempt projects.
5. 4）Strengthened management of input tax deduction based on tax payment certificates (e.g., certificates obtained for withholding VAT on behalf of overseas service providers). Taxpayers shall provide written contracts, payment evidence, and either reconciliation statement or invoice from the overseas entity; otherwise, such input tax shall not be deductible.

• Regulations on the Exemption of VAT for Asset Restructuring:

1. 1）In asset restructuring, eligible asset transfers are exempt from VAT, and the corresponding input tax credits are deductible. The scope of assets has been expanded beyond goods and real estate to include financial products and intangible assets.
2. 2）Asset restructuring must satisfy all four of the following conditions to qualify for VAT exemption:
3.    a）The target of asset restructuring shall be an operating business capable of relatively independent operation;
4.    b）The transferred asset package shall include assets, receivables, liabilities, and employees in combination;
5.    c）The transaction shall have a reasonable commercial purpose;
6.    d）Where the transferor is a general taxpayer, the transferee shall also be a general taxpayer.
7. 3）Input tax credits existing prior to the tax deregistration of the merged enterprise may be carried forward and deducted by the merged taxpayer.

• Provide examples of situations where the tax rate applicable to the principal business is used for mixed sales, and require other businesses to apply the same treatment:

1. 1）Sales of software products coupled with the provision of installation, maintenance, training and other services: the tax rate applicable to software products shall apply;
2. 2）Sales of movable panel houses, machinery and equipment, steel structures and other goods coupled with the provision of installation services: the tax rate applicable to goods shall apply;
3. 3）In battery charging and swapping operations, sales of electric power coupled with charges for battery replacement, maintenance and other service fees: the tax rate applicable to electric power products shall apply;
4. 4）Provision of transportation equipment leasing services coupled with charges for information technology and other service fees: the tax rate applicable to leasing services shall apply.

• The timing of tax liability occurrence has been clarified for the following four scenarios:

1. 1）Goods such as large equipment with a production and sales period exceeding 12 months: The date of receipt of payment or the payment date agreed in the contract, whichever comes first.
2. 2）Services provided in installments after advance receipt of payment: The date on which the service is first provided or the date agreed in the contract, whichever is earlier. The declared amount shall be the total consideration received.
3. 3）Transfer of real estate: The date on which the ownership registration is completed or the date on which the real estate is actually delivered, whichever comes first.
4. 4）Interest receivable but not yet collected by financial institutions: Interest receivable but not yet collected within 90 days from the interest accrual date shall be taxed as prescribed. Interest overdue for more than 90 days shall be declared and paid only upon actual receipt.