Issued by: Ministry of Finance, State Taxation Administration

Issue No.: Announcement No. 10, 2026 of the Ministry of Finance and the State Taxation Administration

Release Date: January 30, 2026

Effective Date: January 1, 2026

Links: https://fgk.chinatax.gov.cn/zcfgk/c102416/c5247434/content.html

To ensure a smooth transition of policies, Announcement No. 10 of 2026 of the Ministry of Finance and the State Taxation Administration clarifies various matters concerning the continuity of VAT preferential policies following the implementation of the VAT Law. The key points are as follows:

• VAT Threshold for Small-Scale Taxpayers (Effective Period: January 1, 2026 – December 31, 2027)

1. 1）Periodic Taxation: Monthly sales revenue not exceeding RMB 100,000, or quarterly sales revenue not exceeding RMB 300,000;
2. 2）Per-Transaction Taxation: The threshold has been raised from the original RMB 500 to RMB 1,000 per transaction (or per day).

• VAT Exemption Items

1. 1）Exemption items applicable from January 1, 2026: The Announcement specifies the implementation standards for the nine categories of statutory VAT-exempt items stipulated in the VAT Law. It also extends several current VAT exemption policies, including: individuals engaged in the transfer of financial products; Hong Kong market investors trading stocks and funds; and gratuitous transfer of real estate or land use rights by individuals due to family property division, among others.
2. 2）Exemption items applicable from January 1, 2026 to December 31, 2027: These include technology transfer and development; interest income from unified borrowing and lending business; international freight forwarding services; and income from trading of stocks and bonds by publicly offered securities investment funds, among others.

• Projects Subject to Simplified Tax Calculation Method

1.  1）Projects subject to the simplified tax calculation method at 3% and 5% rates from January 1, 2026 to December 31, 2027.
2.    a）Projects subject to 3% rate: These include construction services provided on a labor-only basis (clear-package basis); construction services provided for old construction projects; non-academic education services; and VAT taxable acts occurring during the operation of contractual asset management products by asset management product managers, among others.
3.     b）Projects subject to 5% rate: As the VAT Law only stipulates that the simplified tax calculation method applies to a 3% rate, whether the 5% rate would continue has been a matter of widespread concern in the industry. Announcement No. 10 stipulates that general taxpayers' transitional projects from the Business Tax to VAT reform (such as leasing, sale, and financial leasing of real estate acquired before April 30, 2016) may continue to elect the simplified tax calculation method and pay VAT at 5% until December 31, 2027.
4.    c）Certain original simplified taxation policies will not be extended: These include construction services provided for construction projects with materials supplied by the client (originally subject to 3% rate); sale of biological products (originally subject to 3% rate); and labor dispatch services provided by small-scale taxpayers using the 5% rate with differential taxation.
5.  2）Reduced Rate Provisions
6.      a）Projects subject to reduced rates from January 1, 2026:
7.         i. Sale of used fixed assets for which input VAT has not been deducted, and sale of second-hand goods: subject to 3% rate but reduced to 2% payable rate;
8.         ii. Individuals renting out residential housing: subject to 3% rate but reduced to 1.5% payable rate;
9.         iii. Housing rental enterprises renting housing to individuals: subject to 5% rate but reduced to 1.5% payable rate.
10.   b）Projects subject to reduced rates from January 1, 2026 to December 31, 2027:
11. Taxable transactions of small-scale taxpayers (excluding sale and lease of real estate or land use rights): subject to 3% rate but reduced to 1% payable rate;
12. Taxpayers engaged in second-hand car dealership business selling second-hand cars they have acquired: subject to 3% rate but reduced to 0.5% payable rate.

• Projects Subject to Differential Taxation

1.  1）Projects subject to differential taxation from January 1, 2026 to December 31, 2027:

The Announcement summarizes and extends common differential taxation policies, including financial leasing; financial leaseback services; subcontracting of construction services (subject to simplified tax calculation method); labor dispatch services by general taxpayers; tourism services; real estate development enterprises selling real estate projects; and trade-in business of gold and silver jewelry.

It should be noted that certain preferential differential taxation policies have not been extended, including: human resource outsourcing services; water fee collection by property management services; and labor dispatch services provided by small-scale taxpayers.

2.  2）The Announcement clearly stipulates that deduction items must be supported by legally valid vouchers; otherwise, no deduction shall be allowed. Additionally, specific invoicing requirements have been established—for certain businesses (including labor dispatch, transfer of land use rights, and sale of immovable property), the sales amount and deduction amount must be separately indicated on the same invoice.

• Other VAT Preferential Policies

1. 1）Immediate Refund Policy: The immediate refund policy has been extended for certain sectors (such as software industry and comprehensive resource utilization) without a specified expiration date; while for certain sectors (such as pipeline transportation services and employment of disabled persons), the immediate refund policy will continue until December 31, 2027.
2. 2）Refund-after-Collection Policy: The refund-after-collection policy for the nuclear power industry that meets applicable regulations will continue; the refund-after-collection policy for publication, printing, and production businesses will continue until December 31, 2027.

 3）Additional Deduction Policy: The preferential policies allowing general VAT taxpayers in advanced manufacturing to claim an additional 5% deduction on input VAT, and general VAT taxpayers in integrated circuit and industrial machine tool industries to claim an additional 15% deduction on input VAT, will continue until December 31, 2027.