Regulatory updates - China

On December 19, 2025, the State Council passed the Implementing Regulations for the VAT Law (Regulations), which are an essential part of the VAT legal framework and a key safeguard for the effective enforcement of the VAT Law.

Key features of the Regulations

• Maintaining stability: Most existing rules remain unchanged, avoiding additional burdens for businesses. For instance, the scope of taxable items, deduction rules, and export tax refunds remain the same, with some refinements, such as treatment of loan interest deductions.

• Clarifying VAT Law provisions: Detailed interpretations include definitions of taxable goods and services, principles for applying multiple tax rates, and rules for input tax deductions.

• Optimizing tax policy: The Regulations align with international standards and ensure fairness. For instance, input VAT cannot be deducted for purchases used in non-taxable activities, and Special VAT fapiao should not be issuedin these cases.

• Updating administration measures: Clear deadlines for natural persons to declare tax and introduce withholding obligations for taxpayers in certain casesaim to reduce compliance burdens.

The Regulations will take effect on January 1, 2026. 

On September 8, the Chinese Government published an announcement confirming the full transition to electronic invoices for national electronic railway passenger tickets from October 1, 2025.  

This follows a transition period between November 2024 and September 30, when both paper reimbursement vouchers and electronic invoices have been used in parallel.  

Electronic passenger railway tickets have been fully implemented since 2020.  

The legislation, published on May 19, 2025, introduces and outlines standardized processes for handling financial and accounting data in electronic vouchers. The electronic vouchers supported include:

• VAT e-invoices;
• E-receipts;
• Transportation tickets;
• Fiscal electronic bills, and more.

The vouchers must be in structured formats such as XML (Extensible Markup Language) and XBRL (Extensible Business Reporting Language), allowing for automated processing, which entails that the data must be received, recorded, reimbursed, and archived without the need for conversion.

The e-vouchers intend to replace historic paper-based practices by having ERP compatibility with the structured data, preserving the integrity and authenticity of data, and ultimately reducing administrative burdens associated with manual processes.

Taxpayers with existing accounting software or ERP systems and accounting software or ERP vendors are required to upgrade these systems within three years of the effective date of the notice to meet the requirements of the electronic voucher data standards.