Taxpayers in China: The Difference Between Small-Scale and General Taxpayer Status
When registering a company in China, one of the most important decisions is choosing the type of VAT taxpayer:
- Small-Scale Taxpayer (小规模纳税人)
- General Taxpayer (一般纳税人)
Each status has its own rules, benefits, and obligations. Here’s a clear breakdown:
1. Small-Scale Taxpayer (小规模纳税人)
Who it’s for:
- Small businesses or startups
- Annual taxable sales under 5 million RMB
VAT Rate:
- Usually 3% (flat rate, no VAT credit or deduction)
Features:
- Simple accounting
- No need to issue VAT special fapiao (invoices) on your own (tax bureau issues on request)
- Cannot deduct input VAT (you pay VAT on total sales, not net of purchases)
Pros:
- Easy to manage
- Lower compliance requirements
- Good for service-based or early-stage businesses
Cons:
- Not attractive for B2B clients (they can’t deduct your VAT)
- Limits your ability to issue full VAT invoices
2. General Taxpayer (一般纳税人)
Who it’s for:
- Companies with higher turnover or working with corporate clients
- Required if annual revenue exceeds 5 million RMB
- Or voluntarily apply if proper accounting systems are in place
VAT Rates (as of 2025):
| Type of Business | VAT Rate |
|---|---|
| Services (e.g. design, IT) | 6% |
| Manufacturing | 13% |
| Import/export & logistics | 9–13% |
Features:
- Must maintain full bookkeeping
- Can deduct input VAT (tax already paid on purchases)
- Can issue VAT special fapiao (very important for clients)
Pros:
- Attractive for B2B clients
- Can reclaim VAT on business expenses
- Necessary for large-scale or export businesses
Cons:
- Stricter compliance
- More frequent tax filings
- Requires dedicated accounting team or external support
How to Choose?
| Criteria | Small-Scale | General Taxpayer |
|---|---|---|
| Annual Sales | < ¥5 million | > ¥5 million (or voluntary) |
| VAT Deduction | ❌ Not allowed | ✅ Allowed |
| Invoice Type | Basic invoices only | Full VAT invoices |
| Complexity | Low | High |
| Suitable for | Freelancers, startups | Exporters, B2B firms |
Conclusion
If you’re just starting out and want to keep things simple, small-scale status may be enough.
But if you plan to grow, work with corporate clients, or export goods — general taxpayer status gives you far more flexibility and tax efficiency.
Need help choosing or upgrading your VAT status? Let us guide you through the best option for your business in China.
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