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In this China Value Added Tax (VAT) Q&A, we provide clear guidance on invoicing, input tax credits, deemed sales, and cross-border transactions.

VAT compliance in China involves complex rules and interpretations that can significantly affect daily business operations. To help companies navigate these challenges, this Q&A compiles frequently asked questions based on official announcements and prevailing regulations, aligned with the principles of the new VAT Law taking effect on January 1, 2026. The answers aim to clarify practical issues such as invoice issuance, deemed sales, input tax credits, and cross-border transactions, enabling businesses to maintain compliance while optimizing tax management.

FAQs on VAT management in China

Q1. Does issuing an invoice before receiving payment or delivering goods constitute false issuance?

Answer:​ No. The parties have an actual transaction; the invoice is simply being issued in advance. According to the Interpretation of the Announcement of the State Taxation Administration on Issues Concerning Taxpayers’ Issuance of Special VAT Invoices to External Parties, as long as there is a subsequent actual transaction, issuing an invoice in advance based on the agreement does not constitute false issuance.

Q2. Can a special VAT invoice be issued externally for transactions under the simplified tax calculation method?

Answer:​ Yes. Items under the simplified tax calculation method are not within the scope of transactions for which Special VAT Invoices are prohibited from being issued.

Q3. Can an invoice be issued for a business activity outside the company’s registered business scope?

Answer:​ Yes. Issuing an invoice is not related to the business scope; invoices should be issued based on actual business activity. If such activities are conducted regularly, it is recommended to add them to the company’s business scope.

Q4. If a company’s employees book air tickets through a travel agency and obtain an electronic general VAT invoice for brokerage agency services, can the input tax be credited?

Answer:​ If the electronic general VAT invoice is issued specifically for brokerage agency services, the input tax cannot be credited. If it is an electronic general VAT invoice for domestic passenger transport services and meets the relevant conditions, the input tax can be credited.

Q5. During the Mid-Autumn Festival, a company gives shopping cards purchased from a supermarket to employees. Does this need to be treated as a deemed sale?

Answer:​ No. A shopping card is essentially a form of currency, not a good. It does not meet the conditions for a deemed sale, so it is not treated as one.

Q6. If a company’s R&D department uses inventory goods for R&D purposes, does this need to be treated as a Deemed Sale for VAT purposes?

Answer:​ No, it does not need to be treated as a deemed sale.

Q7. A company lends money externally. The interest payment date specified in the original loan agreement was later changed by a supplementary agreement. When does the VAT liability arise for this loan interest, based on the original agreement or the supplementary agreement?

Answer:​ The VAT liability arises based on the date stipulated in the supplementary agreement. According to Article 45 of Appendix 1 of Cai Shui [2016] No.36, if a written contract specifies a payment date, the VAT liability arises on that specified payment date.

Q8. A company purchases machinery equipment, and the seller is also responsible for installation and debugging. Should the seller issue a single special VAT invoice for the equipment sale, or separate invoices for the equipment and the installation?

Answer:​ If the seller manufactures the machinery and also provides installation services, the goods and the construction service should be accounted for separately, applying different tax rates or levy rates: 13 percent for the sale of goods, and nine percent or three percent for the installation service. If the equipment is purchased externally and the seller has already separately accounted for the sales of the machinery and the installation service according to the rules for concurrent operations, then the installation service can, under the “Supplier-Provided Equipment Project” provision, be subject to the simplified tax calculation method.

Q9. When a company’s employees travel abroad on business and incur expenses for accommodation and car rental, must the company withhold and remit VAT on these payments?

Answer:​ No. Accommodation and car rental expenses incurred by employees on business trips abroad are consumed overseas; they qualify as services entirely supplied outside China. This is because a) the service provider is an overseas entity or individual, b) the domestic company receives the service outside China, and c) the service starts and ends entirely outside China. Therefore, it does not fall within the scope of China’s VAT, and the company does not need to withhold and remit VAT.

Q10. When a company pays an exhibition fee to attend a trade fair overseas, does it need to withhold and remit VAT and corporate income tax (CIT)?

Answer:​ The exhibition organizer is not considered to be supplying services within China, so no VAT liability arises. Since the labor service is performed outside China, it does not constitute income sourced within China, and there is no need to withhold and remit CIT.

Q11. A company invites an expert to give a lecture and agrees to cover their round-trip airfare. If the company obtains an air transport electronic ticket itinerary with the expert’s identification information, can the company credit the related input VAT?

Answer:​ No. The expert is not an employee of the company. Even with an air transport electronic ticket itinerary containing identity information, the related input VAT cannot be credited. According to State Taxation Administration Announcement [2019] No. 31, creditable input VAT for “domestic passenger transport services” is limited to services used by employees who have signed a labor contract with the company or laborers dispatched to the company.

Q12. A company’s employee travels abroad on business and submits an air ticket with their identity information for reimbursement. Can the company credit the related input VAT?

Answer:​ No. Travel by an employee from within China to a foreign country constitutes an international transport service, not a domestic passenger transport service. Therefore, the input VAT cannot be credited.

Key takeaway

VAT compliance in China requires careful attention to invoice issuance, input tax credit eligibility, and the treatment of special scenarios such as deemed sales and cross-border transactions. While the current rules remain in force, businesses should also prepare for the new VAT Law effective January 1, 2026, which aims to enhance clarity and legal certainty. Maintaining accurate documentation and aligning practices with official interpretations will be critical for minimizing tax risks and ensuring smooth compliance during this transition.

Our tax advisory teams include experienced tax accountants, lawyers, and former tax officials who deliver deep insight into Asia’s tax environments—providing clients with comprehensive advisory and compliance support tailored to regional requirements. To arrange a consultation, please contact China@dezshira.com. 

RWE continues to keep up the pace with the expansion of its solar portfolio. The company has commissioned several solar farms along a motorway (A44n) in North Rhine-Westphalia following around eight months of construction. The total installed capacity amounts to 86.5 megawatts peak (74.6 MWac).

With about 141,000 solar modules, the plants will generate enough electricity to supply the equivalent of 27,700 German households with climate-friendly electricity. The project sites in the Rhenish region lie to the west and east of the motorway between the towns of Bedburg and Jüchen and are on recultivated land at the Garzweiler opencast mine.

Katja Wünschel, CEO RWE Renewables Europe & Australia: “The commissioning of the solar farms alongside the motorway shows that we are consistently driving forward the expansion of our solar portfolio. And we aren’t done there yet. Next year, we will add several thousand solar modules to the project. With wind and solar systems side by side, we are building a renewable energy road on recultivated land along the A44n motorway as a blueprint for further projects in the region.”

Implementation of the solar farm’s second stage with a capacity of 19.9 megawatts peak (15,5 MWac) is planned for next year. More than 30,600 additional solar modules are to be installed on recultivated land in the municipal area of Jüchen. Subject to planning permission, the first half of 2026 could see the start of construction. Commissioning is planned for the end of 2026. Solar projects along motorways not only benefit from faster approval processes but in most cases also enjoy a higher level of public acceptance.

RWE is also currently constructing the Bedburg 3 wind farm with nine turbines and a total capacity of around 60 megawatts close to the A44n solar sites. RWE builds and operates solar and wind projects with a total capacity of 540 megawatts in the Rhenish region.

Dr Lars Kulik, CTO Lignite at RWE Power: “The solar and wind projects on recultivated land along the A44n emphasise that structural change and the expansion of renewables in the Rhenish lignite area are going hand in hand. There is plenty of space in and around our opencast mines that we are also using for renewables projects. In addition, the employees of RWE Power contribute their knowledge and experience to support the construction and subsequent operation of the solar and wind farms. This means we are creating further prospects for our employees here in the region.”

Keeping up the pace for the expansion of solar energy in the Rhenish region

A strip of land alongside the A44n near Bedburg became the site of a photovoltaic plant constructed by RWE last year. In the immediate vicinity, RWE is also trialling the combination of agriculture and green electricity generation at its agrivoltaics demonstration plant. All in all, RWE now operates nine solar projects in the Rhenish region, four with their own integrated battery storage units. Further photovoltaic projects in the region are at the planning stage. One of those is the Manheimer Bucht solar farm, which will be located in the southern part of the Hambach opencast mine in the municipal area of Kerpen. Next year, a total of about 26,500 solar modules will be constructed in an area of about 14.5 hectares, equivalent to about 20 football pitches. Following completion at the end of 2026, this solar farm will have a capacity of 17.2 megawatts peak (14.3 MWac).

A map and pictures for media use are available at the RWE Media Centre (credit: RWE).