Invoices must reflect actual transactions; small taxpayers can fully utilize tax exemptions
Original: eternity4719 · source details
Original author: eternity4719 · Chinese source: · English adaptation: parveen0029. Translation and grade notes ↗
Bibliographic titles are retained in their original language.
Source author's views and grades; not individually verified by this site.
Cost and benefit at a glance
- Check the cost Cost ↓
- No cost at all. There is no need to purchase or sell invoices, nor to handle “fictitious invoicing” on behalf of others. Simply issue invoices and file taxes ba…
- Then the source benefit Benefit ↓
- Small taxpayers under the simplified tax regime are legally exempt from VAT if their sales remain below specific thresholds. These thresholds apply from January 1, 2026, through De…
In plain terms
If you are a small taxpayer paying taxes under the simplified regime, and your monthly sales stay under 100,000 yuan or quarterly sales under 300,000 yuan, you are exempt from VAT. Previously taxed at 3%, this rate is now reduced to 1% for the same period. Conversely, arranging fake invoices to offset costs constitutes tax fraud, punishable by up to three years in prison and fines ranging from 20,000 to 200,000 yuan.
This guide's cartoon · show illustration
Enlarge illustrationOriginal illustration with Chinese lettering; the English dialogue is below. Humour is a reading aid, not evidence.
English dialogue
- Open for business!
- Keep the family savings off the table.
Cost: what it takes
No cost at all. There is no need to purchase or sell invoices, nor to handle “fictitious invoicing” on behalf of others. Simply issue invoices and file taxes based on real business activity.
Benefit: what the source reports
Small taxpayers under the simplified tax regime are legally exempt from VAT if their sales remain below specific thresholds. These thresholds apply from January 1, 2026, through December 31, 2027: 100,000 yuan per month, 300,000 yuan per quarter, or 1,000 yuan per transaction/day. Exceptions apply for real estate sales, rentals, and land-use right transfers. For those meeting these limits, the VAT rate drops from 3% to 1%. Issuing VAT invoices without a genuine transaction, or any form of fictitious invoicing, is illegal and carries penalties up to three years imprisonment plus fines up to 200,000 yuan; repeat or larger-scale violations may lead to sentences ranging from three to ten years, or even life imprisonment nationwide.
Conditions, limits and disagreements
The revised VAT Law took effect on January 1, 2026, superseding earlier relief measures for small taxpayers outlined in 2023 documents No. 19 and No. 1. While monetary thresholds remain unchanged, the legal basis has been updated accordingly. The referenced criminal provisions derive from the 1997 Penal Code, specifically Article 205, as amended to reflect current sentencing tiers. Note that VAT exemptions do not apply to income tax; arranging fake invoices is illegal and should never be considered a tax-saving tactic.
Original references
Original bibliographic titles and links are preserved; some titles are in Chinese.
全国人大常委会 (2024). 增值税法（2026 年 1 月 1 日施行，第二十三条）. https://fgk.chinatax.gov.cn/zcfgk/c100009/c5237365/content.html；财政部、税务总局 (2026). 关于增值税法施行后增值税优惠政策衔接事项的公告（财政部 税务总局公告 2026 年第 10 号，第一、二、六条）. https://fgk.chinatax.gov.cn/zcfgk/c102416/c5247434/content.html；全国人大 (1997). 刑法（第二百零五条）. https://www.spp.gov.cn/spp/fl/201802/t20180206_364975.shtml
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