On September 3, 2026, the "Administrative Measures for the Withholding and Payment of Value-Added Tax by Domestic Entities on Individuals’ Taxes" was officially released and came into effect on November 1, 2026. Previously, when enterprises paid service fees to individuals, they only needed to withhold personal income tax. After the new regulations were implemented, for eligible businesses, enterprises will simultaneously bear the obligation to withhold and pay value-added tax and additional taxes. The compliance responsibilities in the payment process have significantly increased. Finance personnel must make process modifications in advance. Here are some of AC’s interpretations of the new policy:

1. Which businesses require VAT deduction?

The new regulations adopt a positive listing approach. Only when domestic natural persons provide the following 7 types of intellectual services to domestic entities will they be subject to VAT withholding obligations: research and development services, software services, design services, consulting services, broadcasting and film production services, cultural services, and educational services.

Leasing, warehousing and loading/unloading, processing and repair services, catering and accommodation, construction projects, goods sales, and transportation services are not within the scope of withholding.

Practical scenario reminder: Lecturer’s lectures, expert reviews, independent director consultations, translation services, and film editing belong to the withholding scope; labor contractors’ project payments, drivers’ freight charges, live streaming commissions (agency fees), advertising and exhibition services do not apply to this withholding rule.

⚠️ The withholding obligor is the service purchaser, not determined by the entity that actually pays the money. If the parent company pays on behalf of the subsidiary, the withholding obligation still belongs to the subsidiary that signed the contract to purchase the services. When multiple institutions pay separately to the same natural person, each is calculated separately and not combined into a single income.

II. Core Practical Rules, Avoiding Frequent Mistakes

1. Threshold: VAT is calculated on a per-transaction basis, while individual income tax is calculated on a monthly basis. The calculation bases are different.

For individual income tax, the threshold for VAT is the non-taxable sales amount of 1,000 yuan per transaction. If the single transaction amount is less than 1,000 yuan, VAT is exempted and no tax is withheld. However, a withholding declaration still needs to be made (even if there is no tax, a declaration is still required).

For remuneration for services, for continuous income from the same project, the individual income tax base is calculated based on the monthly income.

Example: A natural person gives a lecture for 700 yuan. In the same unit, they give 4 lectures in the same month, totaling 2,800 yuan. If the single transaction amount is less than 1,000 yuan, VAT is not withheld; but the individual income tax needs to be pre-withheld and pre-paid based on 2,800 yuan as the remuneration base. (If a natural person receives multiple service fees from the same person on the same day, the sales amount needs to be combined for calculation and cannot be split for payment to avoid withholding obligations.)

2. Withholding of value-added tax does not mean exemption from invoice. Tax deductions before tax still require obtaining invoices.

Many enterprises mistakenly believe that after completing the withholding, they can deduct tax before tax based on the withholding certificate. This is a major misunderstanding.

The announcement clearly states: After withholding value-added tax, when individuals issue invoices on behalf of enterprises, they no longer need to pay taxes repeatedly, but the obligation to obtain invoices has not been waived. According to Announcement No. 28 of 2018, except for small-scale and sporadic business, enterprises still need to obtain invoices issued by individuals for tax deductions before tax.

At the same time, this type of business cannot apply the cumulative withholding policy of Announcement No. 16 of the platform enterprise, and can only pre-deduct individual income tax on a per-transaction basis at a rate of 20% or 40%.

Tax calculation reminder: Income from labor services is calculated based on income excluding value-added tax; the additional taxes withheld should be filled in the "Allowable Deductible Taxes" column in the individual income tax declaration.

3. There are two tax payment methods, but the obligation to file tax returns cannot be waived.

Situation 1: Individuals go to the tax bureau to issue invoices in advance and have already paid VAT. The enterprise does not need to make a duplicate deduction; however, the withholding and declaration still must be completed. Check the box "Already issued invoice" on the declaration form.

Situation 2: Individuals do not complete the tax payment on their own. When the enterprise makes the payment, it must fulfill the withholding obligation.

Risk red line: Failure to withhold VAT as required. According to Article 69 of the Tax Collection and Administration Law, the enterprise will be fined 0.53 times the amount of the unpaid tax and will also have an impact on its tax credit. If the individual refuses to cooperate with the withholding, the enterprise can retain evidence and report to the competent tax authority in a timely manner, which can exempt it from liability.

Article 6 of the method clearly states: For enterprises that do not reach the threshold for taxation, are subject to tax exemption, or the other party has already paid without the need for withholding, the enterprise still needs to file a declaration with the competent tax authority - no tax withholding, but zero declaration. As long as the payment for seven types of services is made, regardless of the amount, each transaction must be declared. Failure to declare is considered a violation.

This article only provides policy interpretation and does not constitute tax or legal advice. The specific content should be based on the latest documents or responses from the competent authorities.