Tax Policies for Students - Before January 1, 2026, ticket revenue from cultural and sports services provided by museums, galleries, and similar institutions is exempt from VAT [2] - Ticket revenue from cultural and religious activities held by temples and churches is exempt from VAT [2] - Until December 31, 2027, ticket revenue from science popularization activities conducted by government departments and science associations is exempt from VAT [2] Summer Part-time Jobs - Students engaged in part-time work are exempt from VAT for the services they provide [3] - Employers are required to withhold and pay personal income tax for remuneration received by interns from vocational and higher education institutions [3] Electric Vehicle Purchase Tax Incentives - From January 1, 2024, to December 31, 2025, there is a vehicle purchase tax exemption for new energy vehicles, with a maximum exemption of 30,000 yuan per vehicle [3] - From January 1, 2026, to December 31, 2027, there will be a 50% reduction in vehicle purchase tax for new energy vehicles, with a maximum reduction of 15,000 yuan per vehicle [3] Education Expense Deductions - Parents can deduct 2,000 yuan per month for each child’s education expenses, applicable to various levels of education including compulsory education and higher education [3] - Deductions can be claimed during the transition period between different levels of education [3]

Group 1 - The draft regulation expands the definition of taxpayers to include a broader range of non-profit entities, aligning with the classification system in the Civil Code [3] - The draft combines modern services and life services into production and life services, and redefines real estate from property to assets [4][5] - The draft clarifies that services directly related to domestic goods or real estate are considered domestic consumption, reducing disputes over cross-border taxable transactions [8] Group 2 - The draft specifies that for foreign entities renting domestic real estate, they must appoint a domestic agent to declare and pay taxes [10] - The draft narrows the scope of small-scale taxpayers to non-enterprise units, allowing only administrative and military units to choose this status [13] - The draft states that loan services and related fees cannot be deducted from input tax [16] Group 3 - The draft introduces changes to the rules for paying taxes when exceeding the small-scale taxpayer threshold, requiring immediate registration as a general taxpayer [18] - The draft adjusts the zero tax rate for cross-border sales of services and intangible assets, removing certain blanket clauses [19] - The draft specifies that non-taxable transactions cannot deduct input tax unless they fall under specific exempt categories [25][26] Group 4 - The draft outlines that losses from fixed assets or real estate cannot deduct input tax based on their initial net value [28] - The draft introduces a new rule for long-term asset input tax allocation, simplifying treatment for assets under 5 million [30] - The draft emphasizes that tax incentives must be publicly disclosed in a timely manner [53]

Core Points - The Ministry of Finance and the State Taxation Administration have released a draft for public consultation regarding the implementation regulations of the Value-Added Tax (VAT) Law in China [1] - The draft clarifies definitions and scopes of taxable transactions, including goods, services, intangible assets, and real estate [1] - It provides detailed explanations for different types of taxpayers, including units, individuals, general taxpayers, and small-scale taxpayers [1] - The draft specifies the circumstances under which services and intangible assets are consumed domestically [1] - It mandates that VAT special invoices must separately indicate sales amounts and VAT amounts [1] - The draft outlines specific standards for VAT exemption projects and clarifies the applicable scope, standards, conditions, and tax administration measures for tax incentives [1] - It addresses illegal activities related to VAT incentives, such as failing to account for VAT exemptions separately or providing false materials [1] Tax Collection Management - The draft includes detailed regulations on tax collection management related to the VAT Law [2] - It specifies rules for taxpayers operating under special circumstances, such as contracting, leasing, and asset management product operations [2] Real Estate Rental Regulations - The draft states that foreign entities and individuals renting out real estate in China must appoint a domestic entity or individual as their agent [3] Tax Obligation Timing - The draft further clarifies the timing of VAT tax obligations [4] - It specifies the starting time for applying the general taxation method, conditions for consolidated tax declarations by headquarters and branches, and prepayment scenarios for taxpayers providing construction services across regions [4] Tax Refund and Exemption - The draft establishes regulations for the calculation methods of tax refunds and exemptions, as well as the deadlines for refund applications [5]

Core Viewpoint - Timely and sufficient acquisition of export tax rebates is crucial for export enterprises, but eligibility is not automatic and is subject to strict legal thresholds [1][2]. Group 1: Conditions for Export Tax Rebate - Export goods must fall within the scope of value-added tax and consumption tax as per national tax laws, meaning goods that are fully exempt or not subject to taxation cannot enjoy rebates [4]. - Goods must have undergone actual customs clearance and been exported from the People's Republic of China, serving as key proof of export [4]. - The export transaction must be recorded in the company's financial accounting system as a sales transaction, reflecting export sales revenue on the books [4]. - Enterprises must have received the corresponding foreign exchange payments for the export business in accordance with national foreign exchange management regulations, with certain exceptions allowed under specific circumstances [4].

Core Viewpoint - The recent draft regulation from the Ministry of Finance and the State Taxation Administration indicates that interest on loans and related fees will not be deductible from value-added tax (VAT), maintaining the current tax treatment and suggesting that reforms in this area are unlikely in the short term [3][5][6]. Summary by Sections VAT Law Implementation - The draft regulation explicitly states that taxpayers cannot deduct input VAT on loan services and related fees, which includes financing advisory fees, handling fees, and consulting fees [3][5]. - This aligns with existing regulations, where input VAT on loan services has not been deductible [6]. Financial Impact - VAT is the largest tax category in China, projected to generate approximately 6.57 trillion yuan in 2024, accounting for 38% of total tax revenue [3]. - Allowing deductions for loan-related expenses could significantly reduce corporate financing costs and improve capital allocation efficiency [6]. Global Comparison - Different countries have varying policies regarding the deductibility of input VAT on loan services; for instance, Germany allows it, while Australia and Japan do not [7]. - The rationale for not allowing such deductions in China is that loan services are viewed more as final consumption rather than inputs for production [7]. Future Considerations - Experts suggest that while theoretically, input VAT on loan services should be deductible, current fiscal constraints and the potential loss of revenue (estimated in the thousands of billions) make such reforms unlikely in the near term [7].

Core Viewpoint - The expectation for the tax deduction of loan interest and related fees has been dashed, as the Ministry of Finance and the State Administration of Taxation have clarified that these expenses will not be deductible under the new VAT regulations set to take effect in 2026 [1][2]. Group 1: Tax Regulations - The draft regulations explicitly state that taxpayers cannot deduct input tax related to loan services and associated fees from their output tax [1][2]. - This aligns with existing regulations, which have historically prohibited the deduction of input tax for loan services and related fees [3]. Group 2: Financial Implications - The VAT is a significant source of revenue for the Chinese government, projected to generate approximately 6.57 trillion yuan in 2024, accounting for 38% of total tax revenue [1]. - Allowing deductions for loan-related expenses could significantly reduce tax revenue, potentially leading to a loss of several hundred billion yuan, which is not feasible given current fiscal constraints [4]. Group 3: International Comparison - Different countries have varying policies regarding the deductibility of input tax on loan services; for instance, Germany allows it, while Australia and Japan do not [4]. - The decision on whether to allow such deductions in China is influenced by the country's economic policies, tax structure, and financial regulatory environment [4].

比如，增值税法第三条明确，在中华人民共和国境内（以下简称境内）销售货物、服务、无形资产、不 动产（以下称应税交易），以及进口货物的单位和个人（包括个体工商户），为增值税的纳税人，应当 依照本法规定缴纳增值税。而此次《条例意见稿》中，则对应税交易中货物、服务、无形资产、不动产 等给出具体的定义。 即将于明年实施的增值税法，迎来一项重磅配套法规。 8月11日，财政部税务总局公开了《中华人民共和国增值税法实施条例（征求意见稿）》（下称《条例 意见稿》），在9月10日前向社会公开征求意见。《条例意见稿》主要是对增值税法相关规定进一步细 化、明确，包括总则、税率、应纳税额、税收优惠、征收管理、附则等六章五十七条内容，以增强税制 的确定性和可操作性。 北京国家会计学院副院长李旭红告诉第一财经，增值税法实施条例是增值税法的重要配套法规，总体是 在增值税法的框架内细化明确相关内容，为增值税法顺利实施提供保障，更好落实税收法定原则。 李旭红认为，目前公开的《条例意见稿》保持增值税税制框架稳定，加强与增值税法和现行增值税政策 的衔接，可以进一步增强税制的确定性和可操作性，有利于稳定社会预期。 《条例意见稿》对增值税法规定的纳税人 ...

Core Viewpoint - The Ministry of Finance and the State Taxation Administration are soliciting opinions on the draft implementation regulations of the Value-Added Tax (VAT) Law, aiming to clarify and detail key elements of the tax system, including taxpayers and taxable scope [1][17]. Group 1: Definitions and Taxpayer Clarifications - The draft regulations define the scope of taxable transactions, including goods, services, intangible assets, and real estate [2][19]. - Clarifications are provided for different types of taxpayers, including units and individuals, general taxpayers, and small-scale taxpayers [3][19]. - The regulations specify the circumstances under which services and intangible assets are consumed domestically [4][19]. - VAT special invoices must separately indicate sales amounts and VAT amounts [5][19]. Group 2: Tax Rates - The regulations clarify the scope of zero-rated export goods and cross-border sales services and intangible assets [6][19][7]. - Rules for applying multiple tax rates and collection rates in a single taxable transaction are detailed [8][19]. Group 3: Tax Payable - Specific provisions regarding the calculation of tax payable are outlined, including methods for deducting input VAT and the scope of non-deductible input VAT [9][20]. - The regulations clarify the methods for deducting input VAT and the range of tax deduction certificates [10][20]. - Methods for adjusting VAT amounts and sales amounts due to sales discounts, cancellations, or returns are specified [11][20]. - Detailed definitions for external costs, assessed sales amounts, and abnormal loss items are provided [12][20]. - Input VAT related to loan services and non-taxable transactions cannot be deducted from output VAT [13][20]. - Rules for deducting input VAT related to purchased goods and services are clarified [14][20]. - The regulations specify the rules for deducting input VAT related to fixed assets, intangible assets, or real estate [15][20]. Group 4: Tax Incentives - The regulations specify the criteria for VAT exemption projects [20]. - The scope, standards, conditions, and tax collection measures for tax incentive policies must be publicly disclosed [20]. - Provisions are made for taxpayers who fail to account for VAT incentive projects separately or who engage in fraudulent activities to obtain VAT incentives [20]. Group 5: Collection Management - The regulations detail provisions for taxpayers operating under special circumstances, such as contracting, leasing, and asset management products [21][20]. - It is specified that foreign entities and individuals renting real estate in China must appoint a domestic agent [21][20]. - Further clarifications are made regarding the timing of VAT obligations [21][20]. - Specific rules for prepayment of taxes for taxpayers providing construction services across regions are included [21][20]. - Provisions for calculating tax refunds and exemptions, as well as the deadlines for refund applications, are established [21][20]. Group 6: Implementation - The effective date of the regulations is clearly stated [22].

Summary of Conference Call on China's Interest Rates and Credit Market Industry Overview - **Industry**: China's Banking and Bond Market - **Key Focus**: Interest rates, credit market dynamics, and government bond yields Core Insights 1. **Government Bond Yield Fluctuations**: - The 10-year China government bond (CGB) yield increased from 1.6% at the start of 2025 to a peak of 1.9% in March, stabilizing at 1.63% before rising to 1.73% in late July. This fluctuation is attributed to the central government's anti-involution campaign and the Mega dam project proposal [2][3]. 2. **Market Confidence Indicators**: - The yield increase is interpreted as a sign of market confidence in potential improvements in corporate profitability, stronger investment stimulus, and a move away from deflation. The expert suggests that both technical factors and macroeconomic conditions, including seasonal liquidity tightening and positive Q2 economic data, are influencing this trend [2][3]. 3. **Interest Rate Outlook**: - The central bank is expected to maintain low rates to support the real economy, with government bond yields anticipated to fluctuate within a range of 1.6% to 1.8% for the remainder of 2025 [2][3]. 4. **Limited Rate Cuts**: - Further cuts to the Loan Prime Rate (LPR) or Reserve Requirement Ratio (RRR) are deemed unlikely due to strong economic data from the first half of 2025 and previous rate cuts in May. The focus will shift to targeted monetary policy tools rather than broad rate cuts [3]. 5. **VAT Reinstatement on Bond Interest**: - The reinstatement of VAT on government bond interest income for institutional investors aims to eliminate tax effects on the yield curve, aligning government and credit bond yields. This change is expected to result in slightly lower yields for existing tax-exempt bonds but may lead to higher coupon rates for new bonds issued post-August 8 [4]. 6. **Impact on Banks**: - The VAT reinstatement raises concerns about banks holding onto old bonds, potentially reducing trading activity and impacting investment gains, which accounted for 10% of banks' revenue in 2024. However, bond trading is expected to remain active due to the large size of the bond market, with banks holding significant portions of CGB and LGB [5][7]. 7. **Bond Trading Dynamics**: - The secondary bond market is projected to stay active, as banks represent only about 10% of bond trading. The tight control on local government and Local Government Financing Vehicle (LGFV) debt growth has created an imbalance in supply and demand, leading to lower yields [7]. Additional Considerations - **Risks to Banking Sector**: - Major risks include deterioration in asset quality due to a soft macro environment, capital adequacy concerns, and pressure on profitability from declining interest rates [9]. - **Valuation Methodology**: - Price targets for H-share and A-share China banks are derived from a three-stage dividend discount model (DDM) and P/B to ROE valuation methodology, respectively [8]. This summary encapsulates the key points discussed in the conference call regarding the outlook for China's interest rates and credit market, highlighting the dynamics affecting government bond yields and the implications for the banking sector.

Group 1 - The credit market has shown a general increase, with the yield curve steepening for perpetual bonds, as credit spreads have narrowed significantly due to a recovery in credit sentiment and favorable tax policies [1][2][4] - The yield on 3-year perpetual bonds has decreased by 3-4 basis points, while the long-end yields have seen limited increases, indicating a flattening of the curve [1][4] - Short-term bonds have outperformed long-term bonds, and lower-rated bonds have performed better than higher-rated ones during this period [1][2] Group 2 - The reintroduction of VAT on newly issued government and local bonds has provided a relative pricing advantage for credit bonds, leading to a noticeable increase in buying activity from public funds [2][14] - Despite a decrease in the scale of wealth management products, there has been a temporary increase in credit holdings due to the attractive pricing of credit bonds [2][25] Group 3 - Since July, there has been a slight increase in the supply of urban investment bonds, alongside stable issuance from state-owned and private enterprises, particularly in the technology sector [3][33] - As of August 10, 2025, the cumulative net financing for credit bonds has reached 1.556 trillion yuan, slightly above the level seen in the same period last year [3][34] Group 4 - Credit spreads have compressed significantly since the beginning of 2025, with short-term spreads compressing more than long-term ones, indicating a structural shift in the credit market [4][47] - The current yield levels for most credit varieties are below those at the beginning of the year, with the exception of some high-grade perpetual bonds [4][51] - Non-financial credit bonds are expected to benefit from a tax advantage of 3-15 basis points, with spreads for mid-to-high-grade 3-5 year credit varieties approaching last year's low points [4][53]