ECONOMY

China Intensifies Crackdown on Illicit Local Tax Incentives

Published: Mar. 4, 2026 3:19 a.m. GMT+8

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The State Taxation Administration. Photo: VCG

China’s top tax authority intensified its crackdown in 2025 on illicit tax incentives offered by local governments, part of a broader campaign to curb regional protectionism and build a unified national market.

In a statement released Monday, the State Taxation Administration detailed the results of a yearlong special campaign targeting irregular investment promotions. The agency said it forwarded 389 investigation leads to local tax bureaus and pushed for the repeal or revision of tax-related agreements that violated national regulations.

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China’s State Taxation Administration cracked down on illicit local tax incentives in 2025, forwarding 389 cases and revising noncompliant agreements.
Over 40 billion yuan ($5.8 billion) in personal income tax was collected from restricted share sales after policy changes, and 8,000+ e-commerce platforms complied with new information regulations, increasing taxpaying merchants by 32%.
Rules tightened for preferential tax zones and streamlined cross-province taxpayer services, with nearly 40,000 transfers and 130 billion yuan in electronic payments.

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What Happened When

End of 2024：: A rule was implemented shifting the place of tax collection for sales of restricted shares from the location of the brokerage to the domicile of the listed company.

2025：: China’s top tax authority intensified its crackdown on illicit tax incentives offered by local governments.

2025：: The tax authority and other government departments tightened the definition of 'substantive operations' for preferential tax zones and introduced a joint inspection mechanism to penalize improperly claimed benefits.

2025：: Over 40 billion yuan in personal income tax tied to transactions of restricted shares was collected through over 4,500 securities firms.

2025：: The administration streamlined cross-regional tax services, enabling nearly 40,000 taxpayers to transfer registrations across provinces and facilitating significant cross-provincial electronic tax payments.

June 2025：: Regulations took effect requiring internet platforms to submit tax-related information.

By March 2, 2026：: The State Taxation Administration released a statement detailing the results of its yearlong campaign, forwarding 389 investigation leads to local bureaus and pushing for the repeal or revision of non-compliant tax agreements.

AI generated, for reference only