China’s instant VAT refund policy for foreign tourists is a strategic move to invigorate the country’s tourism and retail sectors
Effective since 8 April 2025, China’s instant VAT refund initiative allows eligible international visitors to receive VAT refunds directly at the point of purchase, as opposed to claiming refunds upon departure.
The policy, which was piloted in major tourist destinations like Beijing, Shanghai, and Shenzhen, has now been expanded across the country. Foreign tourists (non-resident status will be verified through passport and visa) can obtain immediate tax rebates by presenting their passports at designated tax-free retailers equipped with digital invoicing systems. The hope is that this streamlined process will not only enhance the shopping experience but also encourage tourists to spend more during their stay.
Retailers participating in the programme are required to be registered under China’s Tax-Free Retail Programme and must operate digital invoicing systems integrated with the State Taxation Administration’s platforms. The policy stipulates a minimum eligible purchase amount of RMB 500 per shop, per day, with refunds applicable only to eligible goods and potentially subject to final customs checks.
According to China Briefing, refunds will be based on standard formulas. For example, on a RMB 1,000 purchase with a 13% VAT and an 80% refund rate, a tourist would receive around RMB 92 back.
The implementation of this policy aligns with China’s broader economic strategy to boost spending in the local economy amid global trade tensions. By simplifying the tax refund process, like it has also done with its visa requirements, China hopes to attract more international tourists and enhance their spending within the country. In 2024, the country recorded 64.88 million border crossings by foreign nationals, marking an 82.9% increase year-on-year. The first quarter of 2025 saw 17.44 million crossings, up 33.4% compared to the same period in 2024.
According to the China Daily, economists project that inbound consumption in China could generate between $1.7 trillion (£1.2 trillion) and $4.5 trillion (£3.3 trillion) over the next decade. The instant VAT refund policy is expected to play a significant role in achieving this target by making shopping in China more attractive to foreign visitors.
However, the success of this policy hinges on widespread retailer participation and the robustness of digital infrastructure to handle real-time transactions. Experts suggest that ensuring that a broad range of shops and goods are integrated into the refund programme, along with leveraging technologies like artificial intelligence (AI) to boost the efficiency of processing, could further enhance the shopping experience for tourists.
