China shifts VAT collection to business customers purchasing specified services from domestic individuals 1st November 2026
China is introducing a new VAT withholding obligation for businesses purchasing certain services from domestic individuals from 1 November 2026.
The Ministry of Finance and State Taxation Administration have issued Announcement No. 28 of 2026, implementing the withholding mechanism provided for under China’s new VAT Law framework. It shifts responsibility for collecting and paying VAT from the individual supplier to the business customer.
Which services are affected?
A Chinese business will become the VAT withholding agent when it pays a domestic natural person for:
- research and development services;
- software services;
- design services;
- consulting services;
- radio, film and television programme production;
- cultural services; or
- education services.
The purchaser must calculate and withhold the VAT when making the payment. Applicable VAT surtaxes and fees must also be withheld.
VAT thresholds apply
The obligation is subject to China’s VAT registration and payment thresholds.
For 2026 and 2027, these are CNY1,000 per transaction/day, or CNY100,000 per month and CNY300,000 per quarter, depending on the applicable tax period.
Where VAT is due, the withholding business must file the relevant withholding return and remit the tax within 15 days from the start of the following month.
Platform transactions excluded
The new rules do not apply where an individual supplies the relevant services through an internet platform and the platform operator already handles the individual’s VAT declaration under China’s existing platform rules.
China shifts VAT compliance towards the buyer
The change is significant because it moves VAT compliance for these transactions directly into the purchaser’s accounts payable process.
Businesses will need to identify whether a supplier is a natural person, determine whether the service falls within one of the seven specified categories, test the relevant thresholds and, where required, calculate, withhold, report and remit the VAT.
The rules form part of the implementation of China’s new VAT Law and Implementing Regulations. Until 31 October 2026, affected individuals remain responsible for declaring VAT themselves. From 1 November, the new purchaser withholding mechanism applies to qualifying transactions.
