VAT and invoicing in China (2026): rates, fapiao, e-fapiao

On 1 January 2026 China’s VAT moved from interim regulations into a full statute: the Value-Added Tax Law of the People’s Republic of China (增值税法), adopted on 25 December 2024, took effect together with Implementation Regulations that the State Council published on 30 December 2025. The rates did not change, but the small-scale threshold, the rates, the tax periods and the filing deadline are now written into the law itself. VAT is administered by the State Taxation Administration (国家税务总局, STA) through its local tax bureaus. This guide covers what a small business in mainland China needs to know in 2026: rates, taxpayer status, returns, fapiao and the digital e-fapiao. Figures are as of October 2026.

China’s VAT at a glance

General taxpayers charge one of four rates (Article 10 of the VAT Law), and small-scale taxpayers use a levy rate instead:

The new law keeps the overall structure and tax burden of the old rules. The Implementation Regulations, 54 articles in 6 chapters, define what counts as goods, services, intangible assets and immovable property, list the documents that support an input VAT deduction, and set out the rules for special VAT fapiao and for when the tax becomes due.

When VAT becomes due: on the day you receive payment or obtain the documents to claim it; if you issue the fapiao first, on the day the fapiao is issued (Article 28).

Small-scale or general taxpayer: who pays what

Every business in China is identified for tax by the unified social credit code (统一社会信用代码) on its business licence, an 18-character code. For VAT, what matters is your category:

• Small-scale taxpayer (小规模纳税人): annual taxable sales not above RMB 5 million (Article 9). You pay VAT on your sales at the 3% levy rate, reduced to 1% until 31 December 2027, and you cannot deduct the VAT on your purchases.
• General taxpayer (一般纳税人): once your annual taxable sales pass RMB 5 million, you are no longer small-scale: register with your tax bureau as a general taxpayer and use the general method, output VAT minus input VAT. A small-scale business with sound accounts that can provide accurate tax records may also register to use the general method voluntarily (Article 9), which suits businesses that sell mainly to companies that want to deduct input VAT.

The small-scale exemption threshold in 2026 and 2027

Announcement No. 10 of 2026 of the Ministry of Finance and the STA sets a threshold (起征点) for small-scale taxpayers from 1 January 2026 to 31 December 2027:

• RMB 100,000 of sales a month if you file monthly,
• RMB 300,000 a quarter if you file quarterly, and
• RMB 1,000 per transaction or per day for those taxed transaction by transaction.

Below the threshold, your sales are exempt. It is a threshold, not an allowance: once your sales reach it, VAT is due on all of them. Even below it, you may give up the exemption for some or all sales so that you can issue special VAT fapiao to business customers (STA Announcement No. 4 of 2026). If you use the 1% reduced rate, your fapiao must show 1%.

VAT returns and payment deadlines

• Tax period: 10 days, 15 days, a month or a quarter, set by your tax bureau according to the tax you pay (Article 30). In practice most general taxpayers file monthly and most small-scale taxpayers quarterly.
• Deadline: for monthly and quarterly periods, file and pay within 15 days after the period ends. Taxpayers on 10-day or 15-day periods prepay within 5 days after each period and file within 15 days from the first day of the next month (Articles 30 and 31).
• Holiday shifts: the STA publishes the year’s dates, and deadlines move around public holidays and weekends. In late 2026 the monthly deadlines are 26 October (for September, moved because of the National Day holiday), 16 November and 15 December.
• Exempt small-scale taxpayers still file: a business below the threshold reports its exempt sales on the return.

Fapiao: what a Chinese invoice must be

In China, the document that counts for tax is the fapiao (发票), issued through the tax authority’s system. Your own commercial invoice or a PDF from your software is not a fapiao. Article 34 of the VAT Law requires you to issue and use VAT fapiao lawfully, and the buyer can deduct input VAT only with a valid deduction document, mainly a special VAT fapiao (增值税专用发票).

• Special VAT fapiao: for business customers that want to deduct input VAT.
• General VAT fapiao (普通发票): for consumers and buyers who cannot or do not deduct.
• Content: the system fills in the issuer, and you enter the buyer’s name and taxpayer identification number, the items, quantity, unit price, amount, rate and tax. Since 1 July 2017, a company buyer must give you its taxpayer identification number or unified social credit code even for a general fapiao, and a fapiao without it cannot be used as a tax document (STA Announcement No. 16 of 2017).
• Truthful and complete: issue all parts at once, exactly as the transaction happened; a fapiao that does not match a real transaction is prohibited (Article 21 of the Measures for the Administration of Invoices).
• Numbering: you do not number fapiao yourself. Each digital fapiao gets a 20-digit number from the system: the year, the provincial code, the issuing channel and a sequence.
• Credit limit: the tax bureau sets the maximum total (excluding VAT) you can invoice in a calendar month, based on your risk level, tax credit rating and business, and adjusts it over time. If you expect a large month, ask for an adjustment in advance.

Correcting a fapiao: red-letter fapiao

A fapiao is never changed or deleted. For a return of goods, an error, a stopped service or a sales discount, you reverse the original (blue) fapiao with a red-letter fapiao (红字发票), fully or partly (STA Announcement No. 11 of 2024):

1. 1The buyer has not yet confirmed or booked the fapiao: you issue the red-letter fapiao directly.
2. 2The buyer has already confirmed its use or booked it: either side starts the correction with a red-letter fapiao information confirmation form (红字发票信息确认单), and the other side must confirm it within 72 hours, or the form lapses. Then you issue the red-letter fapiao.
3. 3If the buyer has already deducted the input VAT, it reverses the amount on the form in the current period and keeps the red-letter fapiao with the form in its accounts.

Keeping records

Issued fapiao records must be kept for 5 years (Article 28 of the Measures for the Administration of Invoices). Accounting archives rules can require longer for accounting vouchers, so agree the retention period with your accountant.

The fully digitalised e-fapiao

In China, e-invoicing is not a future project: fapiao are issued through the tax authority’s own systems, and the newest stage is the fully digitalised electronic fapiao (数电发票, often called the digital e-fapiao):

• piloted from 1 December 2021 in Guangdong, Shanghai and Inner Mongolia, then extended region by region,
• available to all taxpayers nationwide from 1 December 2024 (STA Announcement No. 11 of 2024),
• issued through the national e-invoice service platform, with no special tax-control device, and delivered automatically to the buyer’s tax digital account,
• with the same legal effect as a paper fapiao, and free to check on the national VAT invoice verification platform.

The Implementation Regulations also allow for “other deduction documents”, which the authorities describe as room to move from controlling tax through invoices towards governing tax with data. In practice, the fapiao itself must come from the STA’s platform or a channel connected to it; ordinary invoicing software cannot issue one.

Worked example in yuan

A general taxpayer that sells equipment parts (13%) has this month:

VAT payable: output VAT RMB 26,000 minus input VAT (RMB 15,600 + RMB 900 = RMB 16,500) = RMB 9,500, due by the 15th of the next month, or the shifted date.

A small-scale shop that files quarterly with sales of RMB 450,000 (excluding VAT) pays RMB 450,000 × 1% = RMB 4,500, with no deduction for purchases. With sales of RMB 280,000 in the quarter, it is below the RMB 300,000 threshold and pays nothing, but still files its return.

Paying late: tax surcharge and B2B payment terms

• Late VAT: the tax bureau adds a late payment surcharge of 0.05% of the unpaid tax per day from the day after the deadline (Article 32 of the Tax Collection Administration Law), roughly 18% a year.
• Payments to small and medium-sized suppliers: the revised Regulations on Ensuring Payment to Small and Medium-sized Enterprises apply from 1 June 2025. Government bodies and public institutions must pay SMEs within 30 days of delivery (a contract may agree up to 60 days), and large enterprises within 60 days of delivery unless a reasonable different term is agreed. If they pay late, they owe interest at the agreed rate, which cannot be lower than the one-year loan prime rate at signing, or 0.05% a day if no rate was agreed (Article 17).

If you supply large companies or public bodies as an SME, put the payment term in the contract and track it from the delivery date. Our guide on getting paid faster covers the practical side.

Common mistakes

1. 1Sending a commercial invoice instead of a fapiao. Your business customer cannot deduct input VAT without the fapiao.
2. 2Leaving out the buyer’s taxpayer identification number on a fapiao to a company.
3. 3Crossing RMB 5 million of annual sales without registering as a general taxpayer.
4. 4Treating the exemption threshold as an allowance. Once quarterly sales reach RMB 300,000, all of them are taxable.
5. 5Invoicing at 3% when you pay at 1%, or the other way round. The fapiao must match the rate you apply.
6. 6Missing the 72-hour window to confirm a red-letter information form.
7. 7Forgetting that deadlines move around public holidays, and running into the monthly invoicing credit limit at the end of a busy month.

How Clientlly helps

Clientlly numbers your commercial invoices sequentially per series, puts China’s VAT rates on every invoice and links each credit note to the original invoice, so your own records mirror the fapiao and red-letter fapiao you issue. You can invoice export customers in multiple currencies, send the PDF in your client’s language with a card payment link, see when it was opened and let automatic reminders go out 3, 14 and 30 days after the due date. Scanned receipts have the tax read automatically, sales and purchase tax books are kept per rate, including exports, and tax reports with Excel and PDF exports are ready for you and your accountant. See invoicing and accounting.

Clientlly does not issue fapiao and is not connected to the STA’s e-invoice service platform. Issue your fapiao and red-letter fapiao through the platform or a channel the tax authority has approved, and use Clientlly for your customers, payments and books.