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Overview of China's VAT rebate scheme
China has a VAT rebate system that reduces the 13% domestic value-added tax (VAT) on certain exported goods. The scheme was designed to support foreign trade and has been a core part of China's trade policy since the 1990s. The VAT rebate system applies to thousands of export product categories (with variable rates depending on the category) and includes key renewable energy products such as solar PV modules, inverters and batteries.
On 9 January 2026, China's Ministry of Finance and State Tax Administration announced a major reduction of VAT rebates for a number of key products, as part of a broader policy move to curb overcapacity and deflationary price competition. The impacted products include solar PV components and battery products (including grid-scale battery packs as well as key upstream chemicals and inputs), among other products.1
From 1 April 2026, the 9% VAT export rebate on solar products will be eliminated and the 9% VAT export rebate on battery products will be reduced to 6% and then subsequently eliminated from 1 January 2027.
For battery and solar projects that have executed procurement contract(s), it is recommended to consider whether your project is expected to have goods being exported from China after the repeal dates and to assess the impact. For projects yet to reach financial investment decision, project developers should account for the impacts of the VAT rebate reductions on procurement costs.
Key dates at a glance
| Dates | Solar | Batteries |
| Before 31 March 2026 | 9% VAT rebate | 9% VAT rebate |
| 1 April 2026 – 31 December 2026 | 0% VAT rebate | 6% VAT rebate |
| 1 January 2027 onwards | 0% VAT rebate | 0% VAT rebate |
The applicable rebate rate is determined by the export date on customs declarations - this is effectively when the goods are ‘export ready'. Shipment from the port may occur a few days later so precise timing is essential to avoid additional costs.
Implications for projects
- Change in Law considerations: For affected
projects with procurement contracts that were executed prior to
these changes being announced, suppliers may seek change in law
relief for increased costs due to the VAT rebate reduction. Whether
the supplier is entitled to change in law relief will depend on the
specific terms of the change in law provision, including relevant
notice provisions. In particular, it will be relevant to consider
whether change in law relief under the contract:
- is limited to Australian laws; or
- excludes taxes or import/export levies.
- Active engagement with suppliers: Where a supplier may be entitled to change in law relief, project owners should seek to ensure that suppliers are complying with any mitigation obligations. Additionally, project owners may seek to proactively engage with suppliers to explore contractual or commercial options to bring forward export dates to avoid additional costs. Project owners and suppliers with expected shipments prior to 1 April 2026 or 1 January 2027 should look to confirm shipment timelines to mitigate the risk of being impacted by constraints from the rush to complete exports prior to the adjustment dates.
- Consider insurance coverage: Project owners should review existing marine transit insurance coverage to ensure that insured levels remain appropriate in light of cost increases.
- Pre-FID projects: For projects yet to reach financial investment decision, project developers should assess the impacts of the VAT rebate reductions and ensure that financial models are updated to accurately capture costs of procurement.
- Clear drafting approach: For projects expected to execute procurement agreements between now and 1 January 2027, it is recommended that the terms clearly set out whether the contract price is inclusive of the VAT rebate reductions. This will avoid any uncertainty when VAT rebate adjustments occur on 1 April 2026 and 1 January 2027.
Footnote
1. A full list of products is available on the China Ministry of Finance website at: https://szs.mof.gov.cn/zhengcefabu/202601/t20260109_3981637.htm
The content of this article is intended to provide a general guide to the subject matter. Specialist advice should be sought about your specific circumstances.
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