China Clarifies VAT Treatment of Non-Taxable Transactions and Other Matters

China's Ministry of Finance and State Administration of Taxation have issued Announcement No. 25 of 2026, clarifying VAT on non-taxable transactions and other matters. One of the key clarifications concerns non-taxable transactions where input VAT can be deducted and cases where input VAT cannot be deducted. Taxpayers can deduct the corresponding input tax for the following non-taxable transactions:

1. Receiving insurance claim compensation as the insured party;
2. Receiving donations in the form…