China does not have a sales tax in the American sense. Instead of a single charge added at the register, China uses a Value-Added Tax (VAT) that is collected at every stage of production and distribution. The standard VAT rate is 13%, with reduced rates of 9% and 6% for specific categories, plus a 0% rate for exports. So the answer to “does China have sales tax or VAT” is straightforward: it’s VAT, and it has been the country’s main consumption tax since 1994.
A separate Consumption Tax also applies to a narrow list of goods like tobacco, alcohol, and cars, but that sits on top of VAT rather than replacing it.
How China’s VAT Works
VAT uses the credit-invoice method. A business charges output VAT when it sells, pays input VAT when it buys, and remits the difference to the tax authorities each tax period.1PwC. China – Corporate – Other Taxes If input VAT exceeds output VAT, the excess carries forward as a credit.
Businesses handle the paperwork, but the cost lands on the final consumer. Each link in the supply chain only pays tax on the value it adds, and the full tax accumulates in the retail price. A factory that buys RMB 100,000 in materials (RMB 13,000 input VAT) and sells finished goods for RMB 200,000 (RMB 26,000 output VAT) sends RMB 13,000 to the government. The shopper who buys the finished product absorbs the entire RMB 26,000.
China’s VAT operated under provisional regulations for three decades before the Standing Committee of the National People’s Congress passed the Value-Added Tax Law on December 25, 2024. The law took effect on January 1, 2026.2The National People’s Congress of the People’s Republic of China. China Adopts Law on Value-Added Tax The rate tiers carried over unchanged; what tightened was enforcement, with nationwide electronic invoicing and stricter documentation for input VAT deductions.
VAT Rates by Category
The rate depends on what is being sold, not who is selling it.
- 13% is the standard rate. It covers most manufactured goods, imports, and services like processing, repair, and replacement work.1PwC. China – Corporate – Other Taxes
- 9% applies to agricultural products, tap water, natural gas, transportation, postal services, construction, real estate sales, and land-use-right transfers.1PwC. China – Corporate – Other Taxes
- 6% applies to financial services, modern services (consulting, IT, design), telecom value-added services, consumer services, and sales of most intangible property.1PwC. China – Corporate – Other Taxes
- 0% applies to exported goods, international transportation, spacecraft transportation, and certain cross-border services consumed entirely outside China. Zero-rated sales charge no output VAT, and the seller can still claim refunds on input VAT.
When a transaction bundles items taxed at different rates, the 2026 Implementation Regulations require the seller to account for each component separately. Fail to break them out and the highest applicable rate applies to the whole transaction.
General Taxpayers and Small-Scale Taxpayers
Every VAT-registered business in China is classified as either a general taxpayer or a small-scale taxpayer. The dividing line is RMB 5 million in annual taxable sales, roughly USD 690,000. Cross that line and general taxpayer status is mandatory. Stay below it and you are a small-scale taxpayer, though you can elect general status voluntarily.
General taxpayers use the full rate tiers of 13%, 9%, or 6% and can deduct input VAT against output VAT. That deductibility is valuable for any business with significant upstream costs, because every purchase from another VAT-registered supplier generates a credit.
Small-scale taxpayers use a simplified collection rate of 3% and cannot deduct input VAT. Through December 31, 2027, a temporary policy cuts the small-scale rate from 3% to 1%.1PwC. China – Corporate – Other Taxes Small-scale taxpayers with monthly sales below RMB 100,000 (or quarterly sales below RMB 300,000) are exempt from VAT entirely during the 2026–2027 period.
What Is Exempt From VAT
Some transactions are fully exempt, meaning no output VAT is charged. The catch: businesses making exempt sales cannot deduct or claim refunds on the input VAT tied to those sales, so the embedded input tax becomes a hidden cost. For some sellers, exemption is actually worse than being taxed at a low rate.
Common exemptions include agricultural products sold by the original producer, non-profit medical services, and educational services. The 2026 VAT Law carried these forward from the prior framework. Once a business elects exempt treatment for a category, the choice is locked in for 36 months.
Consumption Tax on Specific Goods
VAT is the broad tax. Consumption Tax is the narrow one, applied to categories the government treats as luxuries, environmentally harmful, or bad for public health.1PwC. China – Corporate – Other Taxes
The list includes tobacco, alcoholic beverages, high-end cosmetics, jewelry, passenger vehicles, motorcycles, batteries, coatings, gasoline, and diesel. Rates run from 1% to 56%, with cigarettes at the high end.3EU SME Centre. What Taxes Are Involved When Goods Are Imported Into China Some products are taxed by sales value, some by quantity, and a few by a combination. Unlike VAT, Consumption Tax is generally collected once, at the manufacturing or import stage.
An imported bottle of wine, for example, incurs customs duty, import VAT at 13%, and Consumption Tax at the alcoholic beverage rate, all assessed before it reaches a distributor.
VAT Refunds for Tourists
International visitors can claim a VAT refund on shopping when they leave China. The minimum is a single-day spend of at least RMB 200 (about USD 28) at a participating store.4The State Council of the People’s Republic of China. China’s Refined Tax Refund Policy Fuels Inbound Consumption Refunds can be paid through mobile payment apps, bank transfers, or cash, with cash refunds capped at RMB 20,000 per transaction.
China has also expanded a refund-upon-purchase model at eligible outlets, letting tourists collect the refund at the store instead of waiting for the airport. Tourists present a passport along with shopping and departure details at the service counter, and the refund processes within minutes.4The State Council of the People’s Republic of China. China’s Refined Tax Refund Policy Fuels Inbound Consumption