As a small-scale VAT taxpayer, do I invoice at 1% or 3%? My client insists on a 3% special invoice.
Default to 1%. From January 1, 2026 through December 31, 2027, small-scale VAT taxpayers pay 1% (reduced from the statutory 3% levy rate) on everything except real-estate sales/leasing and land-use-right transfers — and you should invoice at the 1% rate you actually pay. But if a client needs a 3% special VAT invoice for their input credit, you may forgo the relief on that specific transaction, issue the 3% special invoice, and pay 3% on that sale. It's per-transaction, not all-or-nothing.
The rule and its boundaries
| Situation | Invoice rate | Tax you pay |
|---|---|---|
| Normal sales of goods/services (not real estate) | 1% | 1% |
| Client demands a 3% special invoice | 3% special invoice (you forgo the relief on this sale) | 3% on this sale only |
| Selling/leasing real estate, transferring land-use rights | 3% | 3% — excluded from the 1% relief entirely |
| After December 31, 2027 (if not extended) | 3% | 3% |
The relief is in MOF/STA Announcement [2026] No. 10: small-scale taxpayers' transactions subject to the 3% levy rate (other than real-estate sales/leasing and land-use-right transfers) are taxed at a reduced 1% rate, January 1, 2026 – December 31, 2027. The "applicable period" follows the tax-obligation date, not the invoice date.
How "forgoing the relief" actually works
The tax bureau's new-media guidance is explicit: a small-scale taxpayer enjoying the 1% relief may choose to forgo it on part or all of its sales income and issue special VAT invoices instead. The mechanics:
- It's per transaction. Issuing one 3% special invoice means you pay 3% on that sale — it does not affect your other sales, which keep the 1% treatment.
- Invoice what you pay. If you take the 1% relief, issue the invoice at 1%. The invoice rate and the declared rate must match.
- No take-backs on that invoice. Once a 3% special invoice is issued and can't be voided or reversed, that sale is taxed at 3%, period. (Changing it back requires voiding or red-letter reversal first — see the companion article.)
A concrete example from the bureau: a small shop with ¥80,000 in monthly sales issues a 3% special invoice for a ¥20,000 sale to a mall that needs the input credit. It pays 3% on the ¥20,000 and 1% on the rest. Nothing else changes.
What going wrong costs
The pain in the question is real: on a ¥100,000 sale, 1% costs ¥1,000 in VAT while 3% costs ¥3,000 — triple. If you reflexively issue 3% invoices "the way we've always done it," you triple the VAT on every sale for no reason. Conversely, if a client genuinely needs the 3% credit and you issue 1%, they'll come back asking for a reissue — and reissuing means voiding or red-lettering the original first.
Set a simple house rule: 1% by default; 3% special invoice only when the client explicitly asks and you accept the extra 2 points of tax as the cost of keeping the customer.
Frequently asked questions
Can I issue some invoices at 1% and some at 3% in the same month?
Yes. The forgo choice is per transaction. Just make sure each invoice's rate matches how you declare that sale, and keep them clearly separated in your books.
My client wants a 3% special invoice but I already issued a 1% ordinary invoice. Now what?
Void the 1% invoice if it's still in the same month and unused, or issue a red-letter reversal, then issue the 3% special invoice and declare that sale at 3%. Don't just issue a second invoice on top.
Does the 1% relief apply to my rental income from a shop space I lease out?
No. Real-estate leasing is carved out of the 1% relief — it stays at 3% (see the rent-invoice article for why your landlord can't do 1%).
Sources
- 财政部 税务总局公告2026年第10号 (3%→1% relief, 2026-01-01 to 2027-12-31; real-estate carve-out)
- 国家税务总局新媒体 on forgoing the relief to issue special invoices (2023年第1号征管口径)
- https://www.10100.com/article/150050352