Recent Important Regulation Highlight

Strengthened Tax Supervision in Key Areas in 2026

At the 2026 National Tax Work Conference, the Chinese tax authorities announced that tax enforcement in key risk areas will continue to be strengthened. The authorities will intensify efforts to combat tax evasion and fraud, including the issuance of false invoices, fraudulent export tax refund claims and the improper enjoyment of tax incentives. At the same time, China will further advance its data-driven tax administration (“tax governance through data”) and deepen the long-term joint enforcement mechanism involving eight government authorities. The conference also identified three priority areas for addressing the abusive use of tax incentives in 2026:

• Falsifying eligibility for the Small and Micro-sized Enterprise (SME) status;
• Artificially splitting revenue to qualify for tax preferences available to small-scale VAT taxpayers;
• Improperly claiming regional tax incentives through enterprises without substantive business activities.

In parallel, the State Administration of Taxation (“SAT”), the Ministry of Public Security, the People’s Courts, the People’s Procuratorates, the People’s Bank of China (“PBOC”), the General Administration of Customs (“GAC”), the State Administration for Market Regulation and the State Administration of Foreign Exchange will further strengthen inter-agency cooperation by enhancing tax-related data sharing and risk analysis. This is intended to support a transition from traditional case selection to data-driven, risk-based tax enforcement and enable more comprehensive action against tax violations.

New Regulation on China’s Outbound Investment Law

China’s State Council has issued the Regulation on Outbound Investment (State Council Decree No. 837), which entered into force on 1 July 2026. For the first time, the regulation establishes a unified legal framework at the administrative regulation level governing the administration, facilitation and protection of outbound investment. It applies to outbound investments made by enterprises, other organizations and individual residents in China.

The regulation further clarifies key compliance requirements for outbound investment, including approval and filing procedures, information reporting, cross-border capital registration and national security review. It also provides that investments in the Hong Kong SAR and Macao SAR as well as Taiwan are generally subject to the same regulatory framework. In addition, the regulation specifies the legal consequences of non-compliance, thereby providing a unified legal basis for China’s outbound investment regime.

Adjustment to Vehicle and Vessel Tax Incentives in China

China’s Ministry of Finance (“MOF”), the SAT and the Ministry of Industry and Information Technology have jointly issued a Notice adjusting the Vehicle and Vessel Tax incentives for energy-efficient and new energy vehicles. Effective from 1 January 2027, the 50% reduction of Vehicle and Vessel Tax for qualifying energy-efficient vehicles and the full exemption for qualifying battery electric commercial vehicles, plug-in hybrid (including range-extended) commercial vehicles and fuel cell commercial vehicles will be abolished.

The Notice further clarifies that the revised rules apply to both existing and newly acquired vehicles of the above categories. Accordingly, such vehicles will be subject to Vehicle and Vessel Tax in accordance with the Vehicle and Vessel Tax Law of the People’s Republic of China and the relevant implementing provisions from 1 January 2027. Battery electric passenger vehicles and fuel cell passenger vehicles remain outside the statutory scope of the tax and are therefore not affected by this policy change.