In this China Monthly Tax Brief for October 2025, we highlight key taxation developments relevant to individuals and businesses.
As China continues to refine its tax and regulatory framework to support high-quality, sustainable development, October brought a wave of significant updates with direct implications for foreign-invested enterprises and investors. From targeted VAT incentives for offshore wind power and nuclear energy to stricter technical standards for NEVs, and from duty-free policy upgrades in Hainan to enhanced compliance tools in Shanghai, these measures underscore a clear policy trajectory: precision support for strategic sectors, stronger governance, and improved predictability for businesses operating in China.
This issue covers:
- VAT policy overhaul: Focused incentives for offshore wind and nuclear power, removal of outdated benefits in mature sectors
- Land Appreciation Tax draft rules: Nationwide standardization to reduce compliance uncertainty in real estate transactions
- Environmental Protection Tax expansion: VOC emissions added to the taxable scope, signaling deeper green governance
- Comprehensive M&A tax guide: Multi-tax, full-process framework to reduce restructuring costs and improve clarity
- Gold trading VAT rules: Detailed compliance requirements for standard gold transactions via Shanghai exchanges
- NEV and energy-efficient vehicle incentives: Higher technical thresholds for purchase tax and vehicle/vessel tax benefits
- Duty-free policy upgrades: Expanded product categories and new eligibility rules in Hainan and nationwide duty-free stores
- Advance tax ruling mechanism in Shanghai: A “safe harbor” for complex transactions and investment planning
- Water resource tax refinements in Guangdong: Precision-based administration and stricter qualification criteria
China refines VAT incentives: Targeted support for green and emerging industries
On October 17, 2025, China’s Ministry of Finance (MOF), General Administration of Customs (GAC), and State Taxation Administration (STA) jointly issued Announcement No. 10, marking a major shift in value-added tax (VAT) incentive policies. The move aims to streamline and refocus tax benefits toward strategic emerging sectors, such as offshore wind power and advanced nuclear energy, while phasing out preferential treatment for mature or high-emission industries.
In short: China’s tax incentives are moving from “broad-based” to “precision-targeted,” aligning with the country’s green and innovation-driven development agenda.
Key changes at a glance
| Sector | What’s New |
| Offshore Wind Power | VAT refund: 50% of VAT paid on self-produced offshore wind electricity Valid: Nov 1, 2025 – Dec 31, 2027 |
| Nuclear Power | Existing units (commissioned before Oct 31, 2025): Current VAT policy continues Approved but not yet commissioned (before Oct 31, 2025): Eligible for 50% VAT refund for 10 years post-commissioning Units approved after Nov 1, 2025: No VAT refund |
| Energy & Resource Utilization | VAT refund for coalbed methane sales abolished VAT refund for “new wall materials” abolished |
| High-End Manufacturing & Tech Services | VAT refund for onshore wind products terminated VAT refund for aircraft maintenance services abolished |
| Financial Leasing | VAT refund for leasing services abolished |
| Precious Metals & Jewelry* | Platinum: Import VAT exemption and VAT refund abolished Diamonds: All VAT exemptions and refunds (including import stage) abolished |
Why it matters & who should care
- Industry players: Offshore wind and nuclear sectors gain targeted support; traditional energy, high-end manufacturing, and jewelry sectors face higher tax burdens, so that they need to adjust strategies accordingly.
- Investors & advisors: Signals China’s policy pivot toward green energy and strategic industries, which is critical for investment planning.
- Importers & customs brokers: Watch timing rules closely to avoid unexpected VAT liabilities.
Bottom line
China is using tax policy as a lever to accelerate its green transition and industrial upgrade. Companies and investors should act now to align with this trend.China seeks feedback on New Land Appreciation Tax Administration Rules
On October 31, 2025, the STA released a draft announcement for public comments on several key aspects of Land Appreciation Tax (LAT) administration. The goal is to unify enforcement standards and reduce compliance uncertainty by clarifying eight critical points across the LAT lifecycle, from pre-collection to final clearance and tail-end sales.
Why now? LAT is a core tax in real estate transactions, but inconsistent practices across regions have long created compliance burdens, unpredictability, and enforcement risks. This draft aims to deliver clear, nationwide standards that improve fairness, transparency, and efficiency.
Key highlights of the draft
| No. | Topic | Key Points |
| 1 | Pre-collection filing timeline | Start: Date of first pre-sale permit (or on-site sale filing); if revenue occurs earlier, use the first income date.
End: Last day of the pre-collection period before clearance filing. |
| 2 | Pre-collection tax base | Formula: Prepayments ÷ (1 + VAT rate).
Aligns LAT with VAT and CIT bases for consistency. |
| 3 | Clearance revenue & area cut-off | Both revenue and sales areas are confirmed as of the last pre-collection period before clearance filing. |
| 4 | Deduction for off-site public facility costs | Costs incurred outside the project planning area for government-required public facilities can be deducted as part of the land-use acquisition cost. |
| 5 | Deduction for stamp duty & local education surcharge | Stamp duty booked under “taxes and surcharges” is deductible at clearance.
Local education surcharge on property transfers is treated as a deductible tax. |
| 6 | Tail-end sales filing | Post-pre-collection transfers are treated as tail-end sales.
Income during the clearance review can be reported in the first period after the review conclusion. |
| 7 | Tail-end sales cost calculation | Formula: Approved deductible costs ÷ saleable floor area.
Includes transfer-related taxes. |
| 8 | Tail-end sales exemption | Standard residential units with appreciation ≤20% over deductible costs qualify for LAT exemption. |
Why it matters & who should care
- Real Estate Developers: Especially those with multi-region projects, uniform rules will affect timing of pre-collection filings, deductible cost scope (for example, off-site facility expenses), and tail-end sales treatment.
- Tax advisors & compliance teams: Need to recalibrate guidance and risk controls based on new standards.
- Investors & financial institutions: LAT changes can impact developers’ tax burden, cash flow, and profitability, key for credit and valuation analysis.
- Industry stakeholders: The draft is open for comment until November 29, 2025, a critical window to provide feedback on practical issues like cost deduction criteria and tail-end sales formulas.
Bottom line
This draft is a major step toward predictable, transparent LAT administration. Companies should review the details now to prepare for compliance and influence the final rules.China expands environmental protection tax to cover VOC emissions
On October 28, 2025, China’s National People’s Congress Standing Committee approved an amendment to the Environmental Protection Tax Law, authorizing the State Council to pilot environmental tax collection on volatile organic compounds (VOCs), a major expansion beyond the current scope of air pollutants, water pollutants, solid waste, and noise.
The amendment introduces a new Article 27, creating the legal basis for taxing entities that directly discharge VOCs not already listed in the taxable pollutant table. This move strengthens China’s “green tax system” and signals a shift toward precision pollution control and industrial green transformation. The revised law will be reissued after systematic adjustments to accommodate this change.
Why it matters
- Policy signal: VOC control is now a national priority, reflecting China’s determination to tackle ozone and PM2.5 precursors and deepen air quality management.
- Tax system evolution: Environmental tax is expanding beyond traditional pollutants to complex factors affecting air quality. Taxpayers should expect more dynamic adjustments in the future.
- Strategic implications: Industries must move from passive compliance to proactive planning as environmental costs become internalized.
Who should care
- High-impact sectors: Petrochemicals (refining, organic chemicals), coatings and resins, industrial painting (auto, furniture), packaging and printing (inks), fuel storage and distribution.
- Foreign-invested enterprises: Multinationals with VOC-intensive operations in China face new compliance costs and reporting obligations.
- Investors & ESG analysts: VOC taxation will influence cost structures, investment decisions, and sustainability ratings.
What companies should do now
- Track policy details: Watch for the State Council’s pilot implementation rules, including scope, tax base (emission volume or concentration), rates, and possible exemptions.
- Strengthen emission data management: Build robust VOC monitoring and reporting systems to ensure accurate tax filings.
- Plan green upgrades: Reduce tax exposure through technology upgrades, raw material substitution (for example, water-based coatings), and process innovation.
- Integrate into ESG strategy: Align VOC management with global sustainability commitments and anticipate future pollutant categories.
Bottom line
China’s environmental tax regime is entering a new phase – dynamic, targeted, and closely tied to green development goals. Companies that act early will turn compliance into a competitive advantage.China issues a comprehensive tax guide for corporate M&A and restructuring
In October 2025, China’s MOF and STA jointly released the Guidelines on Major Tax Incentives for Corporate Mergers and Restructuring, the country’s first systematic, multi-tax, full-process guide for restructuring transactions. This marks a major shift from fragmented rules to a coherent framework, designed to reduce tax burdens and support business consolidation and transformation.The guide covers corporate income tax (CIT), VAT, deed tax, LAT, and stamp duty, providing clear rules for various restructuring scenarios, covering legal form changes, debt restructuring, equity acquisitions, asset transfers, mergers, spin-offs, and non-monetary investments. It specifies eligibility, conditions, and compliance requirements, enabling companies to identify applicable tax benefits quickly.
Key highlights
| Tax Type | Key Policies / Treatments | Conditions / Notes |
| CIT | Special tax treatment (Deferral): Allows qualifying companies to defer tax on asset transfers until future disposal, easing short-term cash flow pressure. | Transaction must have a reasonable commercial purpose (not primarily tax-driven);
Equity payment ≥85% of total consideration; Post-restructuring business continuity for 12 months; Shareholding continuity requirements met; and Requires filing and documentation (e.g., shareholding charts, agreements, continuity statements). |
| VAT | Transfer of assets along with associated debts, labor, and rights during restructuring is not subject to VAT, eliminating the turnover tax burden. | — |
| Dee tax & LAT | Exemptions are available for property rights transfers in mergers, spin-offs, and restructurings, reducing real estate transaction costs. | — |
| Stamp duty | Broad exemptions for taxable contracts, accounting books, and property transfer documents during restructuring. | — |
Compliance & risk management
- Strict filing requirements: Companies must submit detailed documentation (for example, agreements, employee arrangements, proof of equity payment ratios).
- Substance over form: Tax authorities will scrutinize commercial purpose; artificial structures to meet conditions may lead to denial of benefits and tax recovery.
- Advance planning: Companies are suggested to use the guide as a planning tool, to simulate tax outcomes, optimize transaction structures, and ensure compliance.
Why it matters
This guide addresses long-standing pain points – unclear rules and fragmented policies – by offering clarity and predictability. For companies pursuing resource integration, technology upgrades, or market expansion, it’s both a tax incentive roadmap and an operational manual. Strategic planning under these rules can unlock significant savings and a competitive advantage.China Clarifies VAT Rules for Standard Gold Transactions
On October 29, 2025, China’s MOF and STA issued Announcement No. 11 and a relevant implementation plan, introducing detailed VAT rules for transactions involving standard gold through the Shanghai Gold Exchange (SGE) and Shanghai Futures Exchange (SHFE). The new policy, effective November 1, 2025, through December 31, 2027, aims to standardize market practices, ensure tax fairness, and support the healthy development of China’s gold market.Key definitions
- Standard gold: Gold traded on SGE or SHFE, meeting specific purity and weight standards (for example, AU99.99, AU99.95; 1kg or 12.5kg bars).
- Investment use: Direct sale or processing into gold bars/coins with ≥99.5% purity or legal tender gold coins approved by the PBOC.
- Non-investment use: All other uses (for example, jewelry manufacturing, industrial applications).
VAT treatment by scenario
- No physical delivery: VAT exempt.
- Physical delivery occurs: VAT treatment depends on the transaction party and the declared use:
| Party | Use | VAT Treatment at Delivery | Input VAT | Subsequent Sale |
| Member Unit | Investment | VAT levied then refunded; SGE issues special VAT invoice | Deductible | VAT payable; only ordinary invoice |
| Member Unit | Non-Investment | VAT exempt; ordinary invoice | Input VAT credit at 6% | Can issue special VAT invoice |
| Customer | Any | VAT exempt; ordinary invoice | Input VAT credit at 6% | Can issue special VAT invoice |
Compliance requirements
- Purpose declaration: Members must declare intended use (investment vs. non-investment) when submitting delivery orders.
- Change of use: Allowed once within six months post-delivery; requires issuing red-letter invoices and adjusting input VAT credits.
- Invoice management: Invoice markings (“Member Investment Gold,” “Member Non-Investment Gold,” “Customer Standard Gold”) are critical for tax compliance.
- Record-keeping: Maintain complete documentation (contracts, delivery notes, payment records) for tax audits.
- Penalties: Misreporting or improper invoicing may lead to suspension of special invoice privileges (three months for first violation, six months for repeat) and severe penalties for fraud.
- Avoid tax risks and penalties
- Optimize transaction structures
- Align with evolving regulatory expectations
China tightens technical standards for NEV and energy-efficient vehicle tax incentives
In October 2025, China’s Ministry of Industry and Information Technology (MIIT), MOF, and STA issued two major announcements setting new technical requirements for tax incentives on new energy vehicles (NEVs) and energy-saving vehicles starting in 2026. This marks a shift toward higher technology thresholds as the government continues to promote green mobility.Key changes
| Tax Type | Key Policies / Treatments | Conditions / Implementation Details |
| Vehicle purchase tax | For 2026–2027, NEVs enjoy a 50% reduction in purchase tax (up to RMB 15,000 per passenger NEV). | Technical standards updated under Announcement No. 24:
– Pure EVs must meet new national standards for electricity consumption; – Plug-in hybrids face stricter requirements for electric-only range and dual-mode energy efficiency. Models listed in the catalog before Dec 31, 2025 will be automatically transferred if compliant; Non-compliant models will be removed but can reapply after upgrades; Deadline for first batch applications: Dec 12, 2025. |
| Vehicle & vessel tax | Announcement No. 25 aligns technical criteria with new national fuel consumption standards for passenger and commercial vehicles. | Effective Jan 1, 2026, only models meeting updated standards qualify for tax reductions or exemptions;• Existing models have until end of 2026 to upgrade and reapply. |
Policy recap
- Current Incentives (2024–2025): NEVs exempt from purchase tax (up to RMB 30,000 per passenger NEV).
- Future Incentives (2026–2027): NEVs taxed at 50 percent rate (up to RMB 15,000 reduction).
- Vehicle & Vessel Tax: Energy-saving vehicles: 50 percent reduction; NEVs and new energy vessels: full exemption.
Why it matters
China is raising the bar for green vehicle incentives, signaling a transition from broad-based support to performance-driven policies. For automakers, this means:- Accelerated R&D and compliance planning to meet stricter energy efficiency and range standards.
- Strategic pricing adjustments to offset reduced tax benefits.
- Early preparation for catalog applications to avoid market disruptions.
Bottom line
Tax incentives remain, but only for technologically advanced models. Companies that adapt quickly will secure a competitive advantage in China’s fast-evolving EV market.Other updates
Hainan's offshore duty-free policy upgraded
On October 15, 2025, the MOF, GAC, and STA issued Announcement No. 9, introducing several enhancements to Hainan’s offshore duty-free regime effective November 1, 2025:- Expanded product categories: Pet supplies, small appliances, and drones added to the duty-free list.
- Tax incentives for domestic goods: VAT and consumption tax refunds for designated domestic products sold in duty-free shops.
- Age threshold raised: Minimum shopping age increased from 16 to 18.
- New eligibility: Travelers leaving both the island and China can now shop duty-free, counted toward the annual RMB 100,000 quota with unlimited transactions. Impact: Strengthens Hainan Free Trade Port’s appeal and boosts domestic consumption.
Broader duty-free store policy nationwide
On October 29, 2025, five ministries jointly released Circular No. 19, effective November 1, 2025, to stimulate inbound and domestic consumption:- Domestic goods encouraged: Allowed in port and downtown duty-free stores under export tax refund rules; mandatory floor space allocation for domestic brands.
- Expanded product range: Smartphones, drones added.
- Decentralized approvals: Local governments empowered to approve duty-free stores for better coverage.
- Enhanced convenience: Online booking and port pickup services improved. Impact: Supports consumption repatriation and duty-free sector growth.
Shanghai introduces an advanced tax ruling mechanism
On October 24, 2025, the Shanghai Tax Bureau issued the Administrative Measures for Advance Tax Rulings, enabling companies to request binding written rulings on complex future transactions.- Benefits: Provides certainty, reduces disputes, and offers “safe harbor” protection from penalties if conditions remain unchanged.
- Use Case: Critical for major investments, restructurings, and cross-border deals in Shanghai. Impact: Improves predictability and risk management for foreign-invested enterprises.
Guangdong refines water resource tax pilot
On October 31, 2025, Guangdong and Shenzhen tax authorities, with provincial finance and water departments, announced stricter rules effective December 1, 2025:- Efficiency-based incentives: Industrial users must meet advanced water-use benchmarks and undergo certification for tax reductions.
- Rural water supply exemption: Limited to listed centralized drinking water projects meeting scale and population criteria.
- Special industry rules: – River extraction (non-hydropower): Taxable volume = RMB 10,000 m³ per RMB 10,000 revenue. – Hydropower: Taxable volume = on-grid electricity ÷ (1 – 1%). Impact: Signals a shift to precision-based water tax administration and compliance tightening.
