China has raised the value‑added tax (VAT) threshold for per‑transaction collections to 1,000 yuan and formally extended preferential “threshold” treatment from individual sellers to a wider class of small‑scale taxpayers, in a move aimed at lightening burdens on gig workers, sole proprietors and micro firms. The Ministry of Finance and the State Taxation Administration published transition rules that take effect on 1 January 2026 and run through 31 December 2027, codifying practices that in many places were already applied in practice.
Under the new announcement, small‑scale taxpayers — defined as entities with annual VAT‑taxable sales not exceeding 5 million yuan — will be exempt from VAT if they fall below statutory cutoffs. The thresholds are 100,000 yuan for a monthly tax period, 300,000 yuan for a quarterly period and 1,000 yuan for each single transaction or day; multiple transactions within one day are aggregated for the per‑day threshold.
The change represents a meaningful upward shift in the per‑transaction threshold, which had previously been applied at up to 500 yuan in many jurisdictions. More importantly, the scope has been clarified and expanded: what had been a de facto concession mainly used by natural persons and individual businesses is now explicitly available to registered small‑scale taxpayers, bringing small firms and individual operators under the same, clearer legal standard.
Tax authorities have, however, carved out specific cases where the generous per‑transaction rule will not apply. For six categories of transactions that exhibit sustained commercial characteristics — including rental of real estate and sales of scrapped goods under so‑called “reverse invoicing” arrangements — natural persons will be required to treat their activity on a monthly basis and apply the 100,000‑yuan monthly threshold instead of the 1,000‑yuan per‑transaction exemption. The aim is to prevent artificial fragmentation of receipts to avoid taxation.
At the same time, Beijing is strengthening collection mechanisms. The implementing regulations reiterate and operationalize withholding responsibilities: domestic payers who make payments for taxable services will act as withholding agents for VAT when applicable. The tax authorities say that whether a taxpayer applies for a formal invoice or the payer withholds and remits the tax, those actions will be treated as fulfilling the taxpayer’s filing obligations.
The immediate winners are likely to be lecturers, freelancers, delivery couriers and other gig workers who are paid in small sums: single payments or daily income below 1,000 yuan will generally fall outside VAT liability. But the policy tightens the net elsewhere by obliging payers to withhold and by specifying when monthly aggregation is required, reducing opportunities for simple administrative avoidance. For businesses that pay many small vendors, the change will increase compliance responsibilities and require operational adjustments.
This move continues a broader recent trend in China of raising thresholds and simplifying VAT rules for small taxpayers as a way to lower costs for micro and small enterprises and to support consumption and employment. Earlier adjustments in recent years raised per‑transaction thresholds incrementally; the current revision consolidates and standardises those ad hoc practices into national rules. The fiscal cost is likely modest because the beneficiaries account for small volumes of VATable sales, and the expanded withholding framework should mitigate some revenue losses.
For international observers, the package is a signal that Beijing remains focused on micro‑level relief measures rather than large‑scale fiscal stimulus. The change reduces paperwork and tax outlays for millions of small operators while tightening enforcement levers that make the system harder to game. How effectively tax authorities implement withholding and how they police aggregation will determine whether the policy achieves its dual goals of easing burdens and protecting revenue.