Global Daily Tax News, China Confirms 2026 Value-Added Tax Changes, (Dec 31, 2025)

China's Ministry of Finance and the State Administration of Taxation have issued Announcement no. 17 of 2025, establishing value-added tax rates that will apply to residential home sales by individuals from 2026.

The announcement prescribes that individuals, excluding general taxpayers operating self-employed businesses, will be liable to a three percent rate of tax on property sales where the property was held for less than two years.

Otherwise, value-added tax will be waived on property sales where the property was held for two years or more.

The change applies from January 1, 2026.

Separately, on December 25, 2025, Chinese Premier Li Qiang signed State Council Decree No. 826, promulgating the "Regulations for the Implementation of the Value-Added Tax Law of the People's Republic of China", which are effective from January 1, 2026.

The regulations are intended to modernize China's VAT regime and bring the rules more into line with international norms, most notably by transitioning towards the destination principle for the allocation of VAT revenue to local authorities. The Government considers that favoring the current origin principle has distorted investment decisions, favoring local authorities investing into production over promoting consumer consumption.

Further, the regulations more accurately define the terms "goods," "services," "intangible assets," and "real estate" for VAT purposes, and establish more stringent oversight regarding value-added tax expenditures.