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China Tax Briefing: What Foreign Founders Need to Know from the “15th Five-Year Plan” Tax Reform Update

A practical digest for foreign founders of the State Council Information Office briefing on tax reform during China’s 15th Five-Year Plan, covering compliance expectations, cross-regional operations, FDI trends and the unified national market.

Why This Briefing Matters for Foreign Founders

On 28 July 2026, the State Council Information Office held a press conference on tax reform and development during China’s 15th Five-Year Plan period. The speakers were Hu Jinglin, Commissioner of the State Taxation Administration (STA), together with Deputy Commissioner Wang Daoshu, spokesperson and Chief Economist Rong Hailou, and Chief Auditor Wang Shiyu. For foreign founders setting up or running a company in China, the briefing offers a useful signal on how tax administration is likely to evolve — and what compliance behaviour will be rewarded.

Below is a practical digest of the facts presented, organised around the questions founders most often ask.

1. The Economy and the Tax Base Are Expanding

The STA reported that in the first half of 2026, active business entities that had handled tax matters and were operating normally grew 20.2% year on year, while the number of entities filing taxable returns rose 10%. Total tax and fee revenue collected by tax authorities reached RMB 16.7 trillion. Tax revenue alone exceeded RMB 10 trillion, up 4.9% year on year (excluding customs-collected import VAT, consumption tax and tariffs, and vessel tonnage tax, and before deducting export rebates). Social insurance fee revenue reached RMB 4.5 trillion, and non-tax revenue RMB 1.8 trillion.

For founders, the takeaway is straightforward: the tax base is broad and growing, and the authorities attribute this to stable economic performance, recovering producer prices and strong momentum in emerging and key industries.

2. Foreign Investment and Exports Remain Resilient

Several indicators are directly relevant to foreign-invested enterprises:

• The number of foreign-invested tax-registered business entities rose 10.9% year on year.
• Declared total profits of foreign-invested enterprises grew 4.5%.
• Export tax rebates processed for enterprises increased 7.7%.

The STA presented these figures as evidence that inbound investment and export activity continue to show resilience. Founders planning a China entity should note that foreign-invested entities remain a monitored and reported category within the tax system.

3. A Unified National Market: Fewer Local Distortions

A major theme of the briefing was the construction of a unified national market. The STA described three areas of work.

Curbing irregular local incentives

Tax authorities pushed provinces and municipalities to repeal or amend 833 documents or agreement clauses related to irregular investment-attraction tax arrangements. They also encouraged nearly 160,000 enterprises that had registered outside their actual place of operation — in some cases to obtain non-standard awards or subsidies — to relocate back. Those that moved back saw their tax payments rise 16% in the first half of 2026.

The STA also published positive and negative lists on compliant invoicing: 16 items setting a “standard line” for compliant invoicing and 28 items marking a “warning line” for non-compliant invoicing.

Consistent application of tax policy

Working with the Ministry of Finance, the STA consolidated more than 80 VAT preferential policies alongside the implementation of the VAT Law, and optimised income tax rules for corporate restructuring. It also required eight local governments operating regional tax incentives to define substantive operating standards and set up joint verification mechanisms.

Uniform enforcement

Cross-regional tax procedures were streamlined, cutting average processing time by 5 to 10 days, with same-day completion where conditions are met. Cross-province electronic tax payments exceeded RMB 130 billion, up 39%. A draft Tax Administrative Penalty Discretionary Benchmark (2026 Edition) was released for public comment, intended to apply a single national benchmark and clarify a list of minor violations not subject to penalties.

4. Cross-Regional Operations Are Getting Easier

In the first half of 2026, tax authorities handled 1.04 million cross-regional tax matters, up 59%, and 24,000 taxpayers completed cross-province relocations. Inter-provincial trade accounted for 41.3% of total sales, up 0.6 percentage points. For founders with multi-city operations, this points to lower friction when moving or expanding across provinces.

5. Compliance Is Being Measured and Rewarded

The STA emphasised its “foundation-strengthening” programme for tax and fee administration, focused on compliance management. In June 2026, the self-declaration rate among corporate taxpayers during the filing period reached 98.5%, up 4.5 percentage points from the start of the year. The 2026 tax payment credit evaluation counted more than 47 million creditworthy entities, up 8.6%, with 7.88 million A-level taxpayers, whose share rose by nearly 7 percentage points.

Practical implication: maintaining clean invoicing, timely filing and accurate declarations directly affects your company’s credit rating and, in turn, how smoothly it interacts with the tax system.

6. Individual Income Tax and Social Protection

Tax incentives for elderly care, healthcare, education and employment grew 11.8% year on year in the first half of 2026. The number of individuals declaring salaries and wages rose 3.5%, including 4.5% growth among private enterprises. Some 126 million people claimed special additional individual income tax deductions for elderly care, healthcare and education, up 5.9%, with deductions exceeding RMB 320 billion, up 8.2%. A pilot occupational injury protection scheme for new forms of employment was expanded nationwide from 1 July 2026, covering 29.1 million people cumulatively.

For founders hiring staff, these figures confirm that individual income tax deductions and social insurance obligations remain central to payroll planning.

7. Sector Signals: “Real, New, Better, Green”

The STA summarised economic trends under four headings:

• Real: industrial enterprise sales rose 7.1%, manufacturing 7.3%; industry accounted for 36% of all enterprise sales, up 2.2 percentage points; industrial equipment investment grew 9.8%.
• New: equipment manufacturing, information transmission/software and technology services together reached 23.5% of all enterprise sales, up 2.2 percentage points.
• Better: among 1 million key tax-source enterprises, declared profits rose 12.8%; declared salary and wage totals rose 5%.
• Green: ecological protection and environmental treatment sales rose 6.9%; clean energy generation sales rose 17.1%.

High-tech industry sales grew 15% and core digital economy industries 8.7%, with their shares of total enterprise sales up 1.7 and 1.1 percentage points respectively. Profits in high-tech manufacturing rose 29.2% and in digital product services 64.4%.

What Founders Should Do Next

Three practical steps follow from the briefing. First, ensure your invoicing practices match the published positive and negative lists. Second, if you operate across provinces, review whether cross-regional filing and payment procedures can now be completed faster. Third, if you rely on any local incentive, confirm that your entity meets substantive operating standards, as eight regions now require this and verify it jointly.

Foreign founders can contact ChinaMNC on WhatsApp / WeChat at +86 153 1898 8535 for help registering and operating a company in China.

This summary is based on information published by the relevant Chinese government website and is general information, not legal or tax advice.