China’s new VAT Law takes effect in 2026

On 1 January 2026, China’s new VAT Law will come into effect, replacing the Provisional VAT Regulations that had governed the system since 1993. This reform brings major structural changes to China’s most important indirect tax.

The law clarifies the scope of taxable transactions by consolidating goods, services, intangibles, and real estate into a unified category. The previous distinction for “labor services” has been removed and is now treated as part of “services.”

Provisions on deemed sales have been updated. Self-produced or commissioned goods provided for non-business use, such as employee benefits, will now be taxable. Free intra-group services between businesses will no longer be subject to VAT.

Rules on input VAT deductions have also changed. Loan service VAT may become deductible; however, this depends on implementing rules to be issued by the State Council.

For small-scale taxpayers, a simplified structure introduces a unified 3% rate, replacing the previous 3% and 5% tiers. Some exceptions may apply, for example in real estate leasing.

The law also introduces anti-avoidance rules allowing tax authorities to adjust valuations in non-monetary or related-party transactions. In addition, taxpayers may either carry forward excess input VAT or apply for a refund, improving liquidity.

CPO & Partners at the ICG European & Asia Integration Meeting | Madrid, 8 July 2025

A day dedicated to international cooperation and strategic dialogue across continents.

The 2nd European & Asia Integration Meeting, hosted by the International Consulting Group in Madrid, brought together professionals from Europe, Asia and Latin America to reflect on today’s global challenges and explore joint solutions in legal, tax and business consultancy.

CPO & Partners contributed with updates on current initiatives in China, including business missions, industrial park partnerships and cross-border investment strategies—demonstrating once again the relevance of building strong, practical bridges between distant markets.

Grateful to ICG and all participants for the enriching discussions and shared vision. Looking forward to future collaborations.

CPO Visits Jiaxing with Lawyer Moschetti

On 17 June 2025, representatives of CPO visited several industrial parks in the city of Jiaxing, not far from Shanghai, alongside Lawyer Giovanni Moschetti, partner of Law Firm Francesco Moschetti, tax, criminal tax and international tax experts, located in Padova (Italy) for more than 50 years.

The day began with a visit to the Pinghu Economic and Technological Development Zone, an industrial park located in the county-level city of Pinghu, part of Jiaxing City in China’s Zhejiang Province. In the afternoon, the delegation moved to Nanhu District, where it held meetings with local government officials from Nanhu District. Discussions focused on cultural exchanges between Italy and China and the incentives the parks can offer to Italian entrepreneurs interested in investing in China.

The presence of Lawyer Moschetti, a professional with over 20 years of experience in tax and legal fields, underscores the growing interest in better understanding China’s landscape and the potential opportunities, both cultural and economic, that can arise from such exchanges.

Future plans are already underway, including delegations of Italian entrepreneurs visiting the toured Parks and cooperation between the two countries to explore and leverage opportunities for economic and cultural exchange.

CPO at the Panda D’Oro Gala Awards – 2025 Edition

On June 14th, CPO & Partners had the pleasure to attend the XIV Edition of the Panda D’Oro Gala Dinner Awards, organized by the China-Italy Chamber of Commerce (CICC) in Shanghai.

The Gala represents one of the most prestigious events for the Italian business community in China, celebrating the outstanding contributions of companies promoting bilateral relations between Italy and China.

For CPO & Partners, this was a valuable opportunity to meet institutions and business leaders, share experiences, and reaffirm our ongoing commitment to supporting international growth strategies between Europe and the Far East.

We’re proud to continue fostering cooperation, building bridges, and promoting synergies that connect companies and territories.

CPO & Partners at the Asia-Pacific Business Roundtable

We were glad to attend the Asia-Pacific Business Roundtable held on June 14 in Shanghai, just ahead of the Panda D’Oro Gala Awards 2025.

An insightful opportunity to explore the current and future outlook of EU–China trade relations, and to connect with key players promoting Italian presence in the Asia-Pacific region.

A dynamic platform for dialogue, exchange, and future cooperation.

Chinese Dragon Boat Festival

also known as the Duanwu Festival (端午节), is a traditional Chinese holiday that falls on the fifth day of the fifth month of the lunar calendar, so the date varies each year according to the Gregorian calendar.

Origins and Significance:

The festival commemorates the death of the patriotic poet Qu Yuan (屈原), who lived in the 3rd century BC during the Warring States period. Qu Yuan, a minister of the State of Chu, committed suicide by drowning himself in the Miluo River after Chu was occupied by an enemy. The local people, to prevent the fish from eating his body, paddled their boats and threw rice balls (zongzi) into the river, giving rise to the current dragon boat races and the tradition of eating zongzi.

Festival Traditions:

– Dragon Boat Races: Teams paddle long boats decorated with dragon heads and tails, competing to reach the finish line first.
– Eating Zongzi: Glutinous rice wrapped in bamboo leaves, often filled with meat, beans, or dates.
– Drinking Realgar Wine: A medicinal wine believed to ward off diseases and evil spirits.
– Wearing Fragrant Pouches: Filled with aromatic herbs, these pouches are worn for protection against diseases.

Symbolism:

The festival celebrates patriotism, loyalty, and the sacrifice of Qu Yuan, and it is an important occasion for cultural reflection and the celebration of Chinese traditions.

Modern Celebration:

Today, the Dragon Boat Festival is a public holiday in China and is celebrated with cultural events, sporting activities, and various traditional rituals, keeping ancient customs alive.

New legislation for China’s private sector economy

The Private Economy Promotion Law of the People’s Republic of China was adopted by the Standing Committee of the National People’s Congress on 30 April 2025, and took officially effect on 20 May.

The new law grants private enterprises equal legal standing and market opportunities alongside other ownership forms, such as State-Owned Enterprises (SOEs). The legislation acts in favor of fair competition practices for private firms, in terms of access to bidding, procurement etc. For example, Art. 10 provides for a nationwide unified negative list system for market access: private firms will be able to equally compete in any sector not included in the list.

Another important point is related to R&D schemes: private enterprises are encouraged to undertake major national science and technology projects, while entitled to receive from the state greater research infrastructure and data resources. The law also mandates government bodies and SOEs to honor payment obligations on schedule, with penalties for default.

Having faced for long-time discrimination and inequality of treatment compared to SOEs, private firms may find enhanced protection through the new legislation. However, as often occurs in the country, the actual safeguards offered by the law can only be evaluated against future enforcement mechanisms.

Under the nation’s strong push for green and low-carbon development, Shanghai is promoting EV adoption through vehicle renewal subsidies and free NEV license plates, accelerating the transition from fuel cars to EVs.

I. Shanghai Vehicle Replacement Policies

In terms of green initiatives for the replacement of old fuel vehicles, in February several Shanghai Municipal Commissions and Bureaus issued the Notice No. 20 [2025] “Implementation Rules for the National Vehicle Scrapping and Renewal Subsidy Policy for 2025”, taking effect upon issuance and valid until 31 March 2026.

The Rules provide for a one-time fixed subsidy for all eligible individual consumers who, between 1 January and 31 December 2025, decide to scrap gasoline passenger vehicles or new energy passenger vehicles (electric vehicles but registered before 31 December 2018) to buy new energy passenger vehicles listed in a specific Catalog issued by the Ministry of Industry and Information Technology. The consumers will also be able to purchase fuel passenger vehicles with set limitations on the engine displacement. The subsidy will be equal to Rmb 20.000 for the purchase of new energy vehicles, Rmb 15.000 for the purchase of fuel vehicles that are complaint with the limitations imposed.

II. Shanghai New Energy Vehicle License Plate Policies

• Shanghai Green License Plate – Exclusive for Pure Electric Vehicles and Fuel Cell Vehicles

According to the “2025 Shanghai Measures to Encourage the Purchase and Use of NEVs”, especially for non-local residents holding a Shanghai Residence Permit, they now only need to have paid social security or personal income tax for 36 months (previously 48 months) to qualify for a free green (NEV) license plate. For applying organizations, they need to have more than five employees enrolled in Shanghai’s social security system or have continuously paid taxes in Shanghai for at least one year before applying. From the application to the final license plate issuance, the process usually takes about half a month.

• Shanghai Blue License Plate – Auction for Traditional Fuel Vehicles

Individuals with Shanghai household registration or non-local residents holding a Shanghai Residence Permit who have continuously paid social security or personal income tax for the past six months, as well as legally registered companies, can apply for the auction of Shanghai blue license plates through online or offline channels by completing the required procedures, including bidding registration and deposit payment. Recent data shows that the average winning bid for an individual blue license plate is approximately Rmb 93,600, while for organizations, it ranges from Rmb 120,000 to Rmb 160,000. The entire process, from the application to the final license plate issuance, may take 2 to 6 months to complete.

III. Green and Blue License Plates Outside Shanghai

Outside Shanghai, big cities like Beijing, Guangzhou and Shenzhen present a similar scenario in terms of waiting time to obtain a NEV green license plate, with an estimate time of around 1-2 weeks. As for the requirements, the key difference is the existence of a quota system, whose process is however more streamlined compared to the quota system for blue plates. Traditional fuel vehicle blue plates in these three cities are managed through a lottery system or a hybrid system of auctions and lotteries. In the capital city, the chances of obtaining the plate are quite low, 0.2% in 2023, and the waiting period can be of several years. As for the hybrid system in Guangzhou and Shenzhen, the average auction price is in the range of Rmb 30,000 to Rmb 50,000, with a waiting period varying from a few months to over a year.

In China, certain cities may impose temporary or permanent limitations for vehicles with non-local license plates. For example, in order to reduce traffic and pollution, in Shanghai drivers with plates issued in other cities are restricted from using specific elevated roads during peak hours, and an additional fee must be paid to use certain expressways. However, looking at a broader perspective, there are not significant restrictions in the country for driving with a non-local car plate.

CPO & Partners was honored to participate as a guest at the 2025 Jiangsu Nantong Su-Xi-Tong Science & Technology Park Investment Promoting Conference in Shanghai.

An insightful event focused on international cooperation, investment opportunities, and innovation. Grateful for the opportunity to exchange ideas and strengthen business relations between Europe and China.

#CPOPartners #InternationalBusiness #Investment #China #GlobalExpansion

On 13 September 2024 the Standing Committee of China’s National People’s Congress approved the “Measures of the State Council on Gradually Delaying the Statutory Retirement Age”, effective from 1 January 2025. The Measures provide for a gradual increasing of the statutory retirement age in a period of 15 years: male employees and female employees in white-collar positions, previously retiring at 60 and 55 years old respectively, will see an increase of 1 month for every 4-month period, to reach 63 and 58 in 2040. Female employees in blue-collar position will pass from the current 50 to 55 in 2040, with a raise of 1 month for every 2-months period. For example, a male employee who was supposed to retire on 1 January 2025 will now retire on 1 February 2025 (1 month increase); one who was going to retire on 1 May 2025 will now retire on 1 July 2025 (2 months increase).

Additionally, minimum contribution years to enjoy pension benefits will also gradually increase from 1 January 2030. From 15 years of paid contributions, each year 6 months will be added, until reaching 20 years.

On 31 December 2024 the “Interim Measures for the Implementation of the Flexible Retirement System” Notice was released by three Ministries and the Organization Department of the Party’s Central Committee. The Notice, also in force from 1 January 2025, expands on the provisions for the flexible early and delayed retirement: employees that reached the minimum contribution period and those who reached the legal retirement age can respectively choose to retire early, given that the retirement age is not lower than the pre-2025 thresholds, and to retire later than the legal retirement age.

The attached document includes the related comparison tables, according to gender and job positions, explaining how the statutory retirement age will be progressively delayed. The tables are in Chinese language with an English translation for reference.