The scope of application for the value-added tax (VAT) category on telecommunications services is set to be adjusted, prompting urgent announcements from the three major telecom operators! On January 31st, the Ministry of Finance and the State Taxation Administration issued the "Announcement on Specific Matters Concerning the Scope of VAT Levy," which clarified the scope of services applicable to the 9% and 6% VAT rates, as well as the specific scope of sales services, intangible assets, and immovable property, involving multiple tax brackets. This "Announcement" will take effect from January 1st, 2026. Currently, China's VAT system primarily features three tiers, with the standard rate being 13%, and the two preferential rates being 9% and 6%. On February 1st, China Mobile Limited (600941.SH) announced that, according to the "Announcement on Specific Matters Concerning the Scope of VAT Levy," effective January 1st, 2026, within the territory of the People's Republic of China, business activities utilizing fixed networks, mobile networks, satellites, and the internet to provide mobile data services, SMS and MMS services, and internet broadband access services will see their applicable tax category adjusted from "Value-Added Telecommunications Services" to "Basic Telecommunications Services," with the corresponding VAT rate increasing from 6% to 9%. This adjustment to the applicable scope of the tax category is expected to have an impact on the company's revenue and profits. On the same day, China Telecom Corporation Limited (601728.SH) and China United Network Communications Limited (600050.SH) also announced that this adjustment to the applicable scope of the VAT category will impact their respective company revenues and profits.
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