Related: CIT rates · Formation guide · Trade & customs · Inbound centre · Exit: Liquidation roadmap.
Business first
VAT is not “just accounting.” It affects:
- Pricing to China customers (tax-inclusive vs exclusive quotes)
- Cash flow (input credits vs output VAT)
- Contract wording (who bears VAT; fapiao type and timing)
- Customs landed cost on imports
- Deal diligence (invoice compliance is a classic M&A finding)
WFOEs that sell goods/services in China generally need a working VAT + fapiao process from the first invoice—not after the tax visit.
VAT basics (plain language)
- Value-added tax applies to most sales of goods, services, and intangible rights in the PRC tax sense—subject to exemptions and special regimes.
- General taxpayers vs small-scale taxpayers — different rate/collection mechanics and credit rights; threshold and election rules are technical—confirm with your advisor when the entity is set up.
- Output VAT on taxable sales; input VAT on qualifying purchases may credit against output for general taxpayers (with documentation rules).
- Withholding / reverse-charge style outcomes can appear on certain overseas services into China—contracting and permanent establishment analysis sit beside VAT.
Fapiao — the invoice that runs the system
China’s fapiao is both commercial evidence and tax control. Practical points:
- Customers often cannot book costs or claim credits without the correct fapiao type.
- Special VAT fapiao vs ordinary fapiao — eligibility and buyer needs differ.
- Digital/electronic fapiao reforms continue; process design must match current local practice.
- False or borrowed fapiao schemes are criminal/tax enforcement magnets—do not “help” counterparties.
Operationally: align CRM/billing, tax desk, and warehouse shipping so fapiao data matches actual supply.
Rates & credits (orientation only)
Headline statutory rates have included multiple tiers for goods/services (commonly discussed bands such as higher goods rates and lower service rates historically—always verify current rate schedules). Preferential rates and exemptions exist for defined categories.
- Do not price from a blog table without advisor confirmation for your tax classification codes.
- Input credit denial often comes from non-compliant fapiao, wrong entity name, or non-taxable use—not from mystery math.
- Export refund / exemption mechanics for exporters are a separate workstream from domestic sales VAT.
Cross-border touchpoints
| Scenario | VAT / tax themes | Portal anchors |
|---|---|---|
| Import goods into China | Import VAT (and duties) at customs; input credit rules for general taxpayers | Trade & customs |
| Export goods | Zero-rate/exemption/refund pathways; document trail | Trade guide + tax advisor |
| Overseas parent invoices China WFOE for services | VAT/withholding and contract substance; PE risk if people on ground | Entity choice |
| China company sells to overseas customer | Export VAT treatment; forex and contracts | Trade + commercial guides |
| E-commerce / platform sales | Platform withholding and consumer fapiao expectations | E-commerce law |
Month-one ops checklist (new WFOE)
- [ ] Tax registration complete; VAT taxpayer category confirmed
- [ ] Fapiao issuance capability live (devices/accounts/e-fapiao as applicable)
- [ ] Chart of accounts maps VAT input/output
- [ ] Contract templates state tax and fapiao obligations
- [ ] Customer master data captures fapiao titles (exact legal names)
- [ ] Import process owners named (broker + tax)
- [ ] Related-party service agreements reviewed for VAT/IIT/CIT interactions
- [ ] Monthly filing calendar with advisor or in-house tax
- [ ] Document retention policy for fapiao and customs papers
Common mistakes
- Quoting customers without VAT clarity — margin disappears at invoicing.
- Issuing fapiao to English trade names that are not the licence name.
- Letting sales promise special fapiao the entity cannot issue yet.
- Ignoring import VAT in landed-cost models.
- Intercompany charges without VAT analysis on cross-border services.
- Buying “invoices” to manufacture cost — enforcement risk, not a loophole.
FAQ
Is VAT the same as CIT?
No. VAT is transactional; CIT taxes profit. Both matter for foreign-invested companies—see CIT orientation.
Does an RO charge VAT like a WFOE?
ROs are not trading companies; they generally do not run a normal sales VAT model. If you need to invoice, you likely need a company—see RO vs WFOE.
Can overseas SaaS bill China users without a WFOE?
Possible commercial patterns exist but raise VAT, IIT, PE, and contracting issues—get tax and legal advice before scaling.
Advisors & counsel
VAT computations and refunds belong with qualified tax advisors. Legal counsel helps on contracts, entity choice, and disputes.
General information only—not tax advice. VAT rates, filing mechanics, and e-fapiao rules change. Confirm with licensed tax professionals for your entity and transactions. Last reviewed: August 2026 · China Legal Portal Editorial