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You pay your supplier.
You receive a valid VAT special invoice.
You think your tax liability is covered.
Think again.
Starting March 1, 2026, China's new "Tax Arrears Announcement Measures" (2025年國家稅務總局令第61號) brings a hard reality for enterprises: If your supplier has unpaid VAT, your input VAT deduction is dead.
You don't get a warning. You don't get a refund. You simply cannot deduct.
If you are the invoice receiver:
If your supplier appears on the tax arrears list, the VAT invoice they issue is effectively worthless for deduction purposes. The tax bureau will reject your claim. No appeal. No exception.
If you are the invoice issuer:
The new rules impose daily late fees of 0.05% on unpaid taxes.
That doesn't sound like much. Let's annualize it:
0.05% × 365 days = 18.25% interest
Tax arrears are the most expensive loan you will ever take.
And the cost isn't just financial. Arrears are published quarterly on official government platforms . Your customers, partners, and competitors can all see it. Your tax credit rating drops. And it takes at least one full month to be removed after you pay everything in full .
The new rules create transparency – but only if you use it.
Before you sign a contract, before you issue a payment, check your supplier's tax status.
Where to check (Shanghai example):
1. Go to: https://shanghai.chinatax.gov.cn
2. Navigate: 納稅服務 → 公眾查詢 → 欠繳稅款納稅人名單
3. Enter the supplier's name or tax ID
If they appear on the list, do not issue payment until they provide proof of clearance. Better yet, find another supplier.
Pro tip: Provincial tax bureaus across China are required to provide public query services for tax arrears in their jurisdiction . Use them.
| Risk | Action Item |
|---|---|
| Supplier has tax arrears | You cannot deduct input VAT – add 13% to your cost |
| Supplier pays late | 18.25% effective interest – more expensive than any bank loan |
| Arrears are public | Announcements on official platforms – check before you pay |
| Clearance takes time | At least one month after full payment – no quick fix |
The new Tax Arrears Announcement Measures protect the tax base. But they also create a supply chain trap.
You are not safe just because you have an invoice. You are only safe if your supplier is compliant.
Check before you pay.
Need a pre-payment supplier check template or assistance navigating local tax bureau portals? Let us know.
Set up in 2009
Focus onTax& Accoounting
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