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Table of Contents
Background and Overview
Refund Paths by Enterprise Type
Qualification Requirements
The Critical Factor: Input Composition Ratio
Policy Overview
How Fidinam Supports Your Business
Recommendations and Next Steps
Background and Overview
Starting from 1 September 2025, China's Ministry of Finance and State Taxation Administration issued Announcement No. 7, introducing a major update to the VAT input credit refund policy.
The reform aims to ease cash flow pressure for a wider range of businesses. However, qualifying for refunds, and calculating them correctly under the “input structure ratio” requires careful attention. In this article, Fidinam shares its insights and strategies to help companies navigate the changes.
Refund Paths by Enterprise Type
Chapt 01
1
Four key industries - manufacturing, R&D and technical services, software and IT services, environmental protection:
From September, VAT general taxpayers in these sectors may apply monthly refunds of their ending input credit balance, subject to conditions.
Where over 50% of turnover derives from the sector in question, companies may qualify. We recommend early assessment and preparation.
2
Real estate development enterprises:
If incremental input credits remain positive for six consecutive months (or two quarters) and reach at least RMB 500,000 in the sixth month, developers may claim refunds of 60% of the incremental amount.
Where this condition is not met, refunds follow the standard rules for other taxpayers.
3
Other industries:
The same requirement of six consecutive months of positive incremental credits and a minimum RMB 500,000 in the sixth month applies.
Refunds are calculated proportionally:
Up to RMB 100 million: 60% refunded
-
Above RMB 100 million: 30% refunded
Qualification Requirements
Chapt 02
Applicants must also meet the following conditions:
1
A VAT credit rating of A or B;
2
No fraudulent refund, export tax refund abuse, or false invoicing within the last 36 months;
3
No more than one penalty for tax evasion within the last 36 months;
4
No benefit from “levy first, refund later” policies since 1 April 2019 (unless specifically provided).
Practical note: A thorough review of credit history and compliance records is strongly advised before applying.
The Critical Factor: Input Composition Ratio
Chapt 03
Refundable amounts depend on the proportion of eligible input invoices:
1
Four key industries:
Calculated as the proportion of the seven designated categories of deductible VAT invoices since April 2019 relative to total deductible input tax in the same period
2
Other industries:
Based on the same ratio, but measured from 1 January of the current year up to the application period
Recommendation: Ensure invoices are accurately classified, reconciled and archived well in advance.
Policy Overview
Chapt 04
|
Enterprise Type |
Key Conditions |
Refund Approach |
|
Four key industries |
>50% of revenue from the qualifying industry |
Monthly refund of ending input VAT × composition ratio |
|
Real estate development |
Six months positive increments, sixth month ≥ RMB 500k |
Refund 60% of incremental amount in month six |
|
Other industries |
Same six-month rule, sixth month ≥ RMB 500k |
≤ RMB 100m: refund 60%; > RMB 100m: refund 30% |
Illustrative examples:
1
Manufacturing:
A company with more than 50% turnover in manufacturing applies in September 2025 with an ending input credit of RMB 1 million and a composition ratio of 70%. Refund available = RMB 700,000.
Note: 70% is not a fixed refund rate; it is calculated according to each enterprise's own input composition ratio.
2
Real estate:
A developer with an incremental input credit of RMB 600,000 in month six qualifies for a 60% refund, i.e. RMB 360,000.
How Fidinam Supports Your Business
Chapt 05
At Fidinam, we provide precise and efficient tax support, ensuring your business can unlock the full potential of the revised regime. Our services include:
1
Compliance assessment:
Confirming industry qualification, credit rating and compliance record;
2
Data organisation:
Reconciling the seven input invoice categories with sales and credit data to calculate ratios and refund amounts accurately;
3
Refund planning:
Modelling potential refund timing and amounts (monthly vs quarterly), aligning with liquidity planning;
4
Application support:
Preparing documentation in line with tax bureau requirements to avoid delays;
5
Risk monitoring:
Implementing safeguards against misclassification or misapplication that could trigger adverse outcomes.
Recommendations and Next Steps
1
Conduct an immediate internal review, determine sector classification, track incremental input credit trends and compile deductible invoices;
2
Re-check credit rating, address any recent penalties or downgrades promptly;
3
Strengthen coordination between finance and tax teams to ensure data accuracy and a defensible calculation methodology.
At Fidinam, we are committed to delivering effective, compliant and pragmatic tax advisory solutions, helping your business capture policy benefits, optimise cash flow, and build long-term financial resilience.
For tailored support, please contact our team, we will be pleased to provide bespoke advice based on your needs.
All information provided is of a general nature and is not intended to be a comprehensive analysis of the points discussed. This article is also not intended to constitute, and should not be taken as, legal, tax, or financial advice. If you are interested in the service mentioned in the article or have any further questions, please reach out to us at info@fidinam.com.cn.
Disclaimer
The content presented herein ("This Content") is information of a preliminary nature prepared by Fidinam. This content is for general information purposes only and does not constitute an offer, solicitation, recommendation, recommendation or offer by Fidinam or any of its affiliates, directors or employees to subscribe for any funds or products, buy or sell any investment instruments, enter into any transaction or complete any legal act. This content may contain the opinions of Fidinam or third parties. Fidinam makes no representations, warranties or undertakings (whether express or implied) that this content is accurate. complete or up-to-date, and there is no obligation to update or keep the information herein up to date. You should not rely on this content. Any research or analysis used for derivation or in relation to information has been obtained from sources of information that Fidinam believes to be reliable and is for its own use only, without any particular investment being considered.
Fidinam is a private consulting firm that was founded in Lugano (Switzerland) in 1960 and offers tax, business, real estate and digital consulting to companies, entrepreneurs and individuals.
In 60 years of activity, we have acquired a wealth of contacts and skills that enables us to meet the needs of clients of all types and to be ready to face the most difficult challenges posed by the markets.
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