On 25 December 2024, the 13th meeting of the Standing Committee of the 14th National People's Congress passed the Value-added Tax Law of the People's Republic of China. This VAT Tax Law will come into effect on 1 January 2026. To provide clients with tax support, Kaizen has summarized the relevant policies on VAT for Taxable Transactions for clients' reference.

1. Definition of domestic taxable transactions
   
   Taxable transactions occurring in China refer to the following circumstances:
   

   (1)	Where goods are sold, the place of shipment or location of the goods is within the territory of China;
   (2)	Where real property is sold or leased or the right to use natural resources is transferred, the place where the real property or natural resources are located is within the territory of China;
   (3)	Where financial commodities are sold, the financial commodities are issued in China, or the seller is a domestic unit or individual;
   (4)	Except as provided in items 2 and 3 of this Article, where services and intangible assets are sold, the services and intangible assets are consumed in China, or the seller is a domestic unit or individual.

   
   
2. Definition of treated as taxable transactions
   
   Under any of the following circumstances, it shall be treated as a taxable transaction:
   

   (1)	Units and individual industrial and commercial households use self-produced or commissioned goods for collective welfare or personal consumption;
   (2)	Free transfer of goods by units and individual industrial and commercial households;
   (3)	Units and individuals transfer intangible assets, real estate or financial commodities free of charge.

   
   
3. Circumstances that do not belong to taxable transactions
   
   Under any of the following circumstances, it is not a taxable transaction, and VAT is not levied:
   

   (1)	Employees provide services for obtaining wages and salaries to the employing units or employers;
   (2)	Collecting fees for administrative undertakings and government-managed funds;
   (3)	Compensation for expropriation or requisition in accordance with the law;
   (4)	Deposit interest income.

KAIZEN Group is equipped with experienced and highly qualified professional consultants and is therefore well positioned to provide professional advice and services in respect of the formation and registration of company, application for various business licenses and permits, any compliance, tax planning, audit, and accounting in China. Please call and talk to our professional consultants for details.