How to Apply for Additional VAT Deduction for Advanced Manufacturing Companies in 2025

How to apply for the additional value-added tax (VAT) deduction in China 2025 is a key concern for manufacturers seeking to lower their tax burden. This article explains the eligibility criteria, application process, deadlines, and compliance obligations for companies, especially foreign-invested enterprises (FIEs), looking to benefit from this advanced manufacturing tax incentive.

In 2023, China announced a significant policy aimed at supporting advanced manufacturing enterprises. According to the policy, from January 1, 2023, to December 31, 2027, eligible advanced manufacturing companies can reduce their VAT payable by enjoying an additional five percent on the deductible input VAT for each period. This is commonly referred to as the “additional VAT deduction policy for advanced manufacturing companies”. (Also read: China Announces New Additional VAT Deduction for Advanced Manufacturing Companies )

Each year, relevant businesses must apply for this deduction, and provincial, regional, or municipal departments of industry and information technology, in coordination with local science, finance, and tax authorities, determine the specific list of companies eligible for this benefit.

So, how can companies apply for this incentive in 2025? On May 28, 2025, the Ministry of Industry and Information Technology (MIIT), the Ministry of Finance (MOF), and the State Taxation Administration (STA) jointly issued a notification outlining the procedures for creating the list of eligible advanced manufacturing enterprises for the 2025 additional VAT deduction policy. Following this, various regions began releasing their specific application guidelines. For example, Shanghai issued its own set of instructions on July 16, 2025, detailing how businesses in the city can apply for the policy.

In this article, we will guide you through the application process for the 2025 additional VAT deduction for advanced manufacturing companies, highlight key dates, and explain the steps businesses need to follow to qualify for this benefit.

Eligibility and timing

Who can apply?

To be eligible for inclusion on the 2025 Advanced Manufacturing Enterprises List, companies must meet several key requirements outlined below:

HNTE qualification

• The applicant must have the status of a High and New Technology Enterprise (HNTE) within the year 2025.
• And companies must meet the qualifications set out in the Guo Ke Fa Huo [2016] No. 32, particularly in terms of R&D expenditure, R&D personnel, and the proportion of high-tech products in their operations during the period between January 1, 2024, and December 31, 2024.

Manufacturing sales proportion

• At least 50 percent of the total sales revenue must come from manufacturing activities.
• This excludes VAT from both total sales and sales of manufacturing products.
• The classification of “manufacturing industry” follows the National Economic Industry Classification (GB/T 4754-2017), specifically the Manufacturing category (Category C).
• For companies that outsource production, the sales revenue associated with those outsourced processes does not count toward manufacturing product sales. However, processing fees can be included in the manufacturing sales if the outsourced company meets the relevant criteria.

Clean tax record

• Companies must not have been involved in any fraudulent tax refund activities (such as obtaining tax refunds through false declarations or invoice fraud) or have faced two or more penalties from tax authorities for tax evasion within the past 36 months.

When to apply?

The application timeline differs depending on whether a company was already listed in the 2024 Advanced Manufacturing Enterprises List or is applying for the first time:

• For companies already listed in the 2024 list: If a company was included in the 2024 list and still holds a valid HNTE qualification, to continue enjoying the policy in 2025, it must submit a new application between the 1st and 10th of each month, starting from June 2025, and no later than April 10, 2026.
• For new applicants:Companies applying for the first time can submit their application from September 2025 onward, between the 1st and 10th of each month, with the same deadline of April 10, 2026.

Application process

How to apply?

Eligible enterprises must apply through the High and New Technology Enterprise Certification Management System:

1. Log in to the official HNTE Certification platform.
2. Submit the required application materials as guided by the system.

Applications shall be reviewed on a one-time submission basis—once approved, the enterprise can enjoy the policy for the applicable period. It is important that all information is accurate and complete at the time of submission, as the approval process follows a strict verification protocol.

Who decides?

The eligibility for the additional VAT deduction for advanced manufacturing companies in 2025 is determined through a coordinated process involving multiple government departments at the provincial and municipal levels.

Decision

The provincial-level departments of industry and information technology, including those in provinces, autonomous regions, centrally administered municipalities, and separately listed cities, are responsible for leading the identification process. They work jointly with local departments of science and technology, finance, and taxation to finalize the list of qualified companies.

Initial review and recommendation

Lower-level industry and information technology departments may be tasked with the initial review of enterprise applications. They work alongside their respective local science, finance, and tax authorities to verify information and recommend enterprises for inclusion in the list.

The review includes verifying:

• Whether the enterprise engages in manufacturing activities;
• Whether it holds a valid HNTE certificate(reviewed by the science and technology or industry and IT departments);
• Whether the enterprise is a general VAT taxpayer; and
• Whether it meets the HNTE criteria for 2024, including the required proportion of manufacturing sales (verified by tax authorities).

If an enterprise does not pass the review, the responsible department must provide a clear reason for disqualification.

Timeline for decision and feedback

From June 2025 onward, local industry and information technology departments are expected to submit approved enterprise lists to the tax authorities by the end of each month.

From July 2025, local tax authorities will report back to local industry and information technology departments on:

• The implementation status of the policy; and
• The tax relief impact observed among the approved enterprises.

Policy enjoyment period

The period during which a company can enjoy the additional VAT deduction for advanced manufacturing companies in 2025 depends on the status and timing of its HNTE qualification:

• HNTE status valid throughout 2025: Companies whose HNTE status remains valid for the entire year of 2025 can enjoy the policy from January 1, 2025, to April 30, 2026.
• HNTE status expires in 2025 and is not renewed: If a company’s HNTE qualification expires during 2025 and it does not obtain a new certificate within the year, the policy can be enjoyed from January 1, 2025, to December 31, 2025 only.
• HNTE status expires in 2025 but is renewed within the same year: If the company renews its HNTE qualification within 2025 after expiration, it can continue enjoying the policy through April 30, 2026.
• Newly recognized HNTE in 2025:Companies that are newly certified as HNTE in 2025 are entitled to enjoy the policy from January 1, 2025, to April 30, 2026.

Special policies for headquarters and branches

Whether a headquarters or branch can enjoy the additional VAT deduction for advanced manufacturing companies depends on their tax reporting structure and business classification:

For enterprises under consolidated VAT filing

• The headquarters must submit all application information on behalf of its branches.
• If the headquarters qualifies as an HNTE and operates in the manufacturing sector, it will consolidate the sales revenue and manufacturing sales ratio across all branches.
• In this case, branches cannot apply separately. The decision on whether the company qualifies for the policy is made by the local industry and information technology department where the headquarters is located, in coordination with local science, finance, and tax authorities.

For enterprises not under consolidated VAT filing

1. If both headquarters and branches are in the manufacturing sector, they must calculate their eligibility separately based on their respective sales data.
2. The headquarters and each branch must apply through their respective local authorities, who will assess and determine their eligibility individually.

Transactions not deductible

To ensure accurate calculation of the additional VAT deduction:

• Transactions between the headquarters and branches, or between enterprises under common control, cannot be used to calculate deductible input VAT for the additional deduction.
• If a company sells raw materials or semi-finished products to another company under a processing arrangement and then repurchases the finished or semi-finished goods, it can only claim the additional deduction on the processing fee portion of the input VAT—not the full transaction value.

Also read: How Is the Additional Deduction Calculated?

Compliance requirements for business changes

If an enterprise undergoes major changes related to its eligibility, such as:

• Name changes;
• Relocation or full migration; or
• Any significant change that could affect qualification status.

It must:

1. Report the changes to the local HNTE Certification authority;
2. Update its information via the HNTE Certification Management System before reapplying for the VAT policy; and
3. Notify the local industry and information technology department, and provide supporting documents.

The final decision on continued eligibility will be made jointly by the local departments of industry and information technology, science, finance, and taxation. If the enterprise meets all requirements after the change, it will be included in the 2025 list accordingly.

In the case of a full relocation, the enterprise must reapply in the new location to continue enjoying the policy.

Key takeaways for FIEs

For FIEs operating in China’s manufacturing sector, the additional VAT deduction policy presents another valuable opportunity to reduce tax burdens and enhance cash flow. However, eligibility and compliance requirements are specific and sometimes complex—especially for businesses with multiple entities or changing qualifications. Below are the essential points FIEs should keep in mind when preparing to apply:

• Eligibility hinges on high-tech status: FIEs must hold valid HNTE status and meet the required share of manufacturing sales—over 50 percent of total revenue (excluding VAT).
• Apply through local authorities: Applications must be submitted through the HNTE Certification Management System and are reviewed by local industry, science, finance, and tax departments.
• Check your structure: If your China operations involve headquarters and branches, determine whether your group files VAT on a consolidated basis. This will affect how and where you apply. Branches under consolidated VAT filing cannot apply independently; qualification depends on the headquarters’ status.
• Stay compliant: Maintain clean tax and compliance records. Any involvement in fraudulent VAT practices or repeated tax evasion in the past 36 months will disqualify the enterprise.
• Mind intra-group transactions: Input VAT from internal transactions within your China group companies or affiliated branches is excluded from additional deduction calculations.
• Renew or update status promptly: Any name changes, relocation, or major organizational shifts must be reported and updated in the certification system before applying or reapplying for the benefit.
• Timing matters:
  • Previously listed enterprises must reapply between June 1, 2025, and April 10, 2026.
  • New applicants can apply from September 1, 2025, until the same deadline.
  • Policy benefits start January 1, 2025, but the end date varies based on the validity or renewal of the HNTE certificate.

Also read: What Are the Tax Incentives in China to Encourage Technology Innovation?

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