Tax Trends in China for 2025

In this blog post, we’ll examine the recent tax trends to China’s tax system from the perspective of foreign businesses and expatriates.

1. Recent Policy Changes

• New VAT Law: China passed a new Value-Added Tax (VAT) Law in December 2024, effective January 2026. The law maintains the three-tier VAT rates (13%, 9%, 6%) but refines taxable transactions and compliance procedures, aiming for greater legal certainty and streamlined governance.

• “Going Global” Guidelines: In October 2024, the State Taxation Administration expanded tax service items and added new chapters for emerging foreign trade models, helping Chinese enterprises manage overseas tax risks.

2. Digitalization of Tax Administration

• E-filing and E-invoicing: China is rapidly digitalizing tax administration, with widespread use of electronic tax bureaus and e-invoicing.

• AI and Big Data: The Golden Tax Phase IV system, expected to be fully operational by 2025, will enhance intelligent tax management and risk identification using AI and big data.

3. International Compliance

• Global Tax Cooperation: China is actively participating in international tax projects, such as the OECD’s “Two-Pillar Solution,” to address cross-border tax challenges and align with global standards.

• Anti-Evasion Measures: The government is committed to combating tax evasion and adapting to evolving global tax rules.

4. Economic Impact

• Growth Target: China is targeting steady economic growth (around 5% for 2025) and may introduce stronger fiscal stimulus, including expanding the budget deficit and consumer-focused policies, to counter external pressures like U.S. tariff hikes.

• Support for Modernization: Tax reforms and incentives are expected to support domestic demand and “Chinese-style modernization.”