New Withholding and Payment Regulations for Design, Consulting, and Training Services: Effective November 1, 2026
📅 2026-10-05
Yiwu International Trade City, Huangyuan Market, and Beixiazhu bosses often rely on external expertise in their business: hiring someone to do product packaging design, finding a person to develop a mini-program or foreign trade ERP, engaging a consulting firm for market planning, inviting a teacher to provide e-commerce training for employees, or hiring a team to shoot product short videos... Typically, it's a cash-and-receipt transaction, with invoices being optional.
However, starting from November 1, 2026, this practice will need to change: according to the newly released Measures for the Withholding and Payment of Value-Added Tax (VAT) by Domestic Entities on Behalf of Individuals (Announcement No. 28 of 2026 by the Ministry of Finance and the State Administration of Taxation), when you pay an individual, you may need to withhold VAT on their behalf and file and pay it on time. If not done correctly, the responsibility lies with you.
I. Who issued the new regulations? When do they take effect?
This time, there are two documents:
- ["
- Announcement of the Ministry of Finance and the State Administration of Taxation on Issuing the Measures for the Withholding and Payment of Value-Added Tax (VAT) by Domestic Entities on Behalf of Individuals (Announcement No. 28 of 2026 by the Ministry of Finance and the State Administration of Taxation), dated September 3, 2026.
- Announcement of the State Administration of Taxation on Matters Concerning the Filing of Withholding and Payment of Value-Added Tax (VAT) by Domestic Entities on Behalf of Individuals (Announcement No. 19 of 2026 by the State Administration of Taxation), which includes the filing forms, dated September 4, 2026.
- Both documents take effect from November 1, 2026.
II. Which payments require withholding? The scope is limited to 7 types of services
Don't panic; not all payments to individuals require withholding. Article 1 of Announcement No. 28 clearly states that when a natural person provides the following services, the domestic entity paying the price is the 'withholding agent':
- Research and development services
- Software services
- Design services
- Consulting services
- Broadcasting, film, and television program (work) production services
- Cultural services
- Educational services
The specific scope is based on the Announcement of the Ministry of Finance and the State Administration of Taxation on Specific Matters Concerning the Scope of VAT Collection (Announcement No. 9 of 2026 by the Ministry of Finance and the State Administration of Taxation).
In the context of Yiwu, hiring an individual designer to modify packaging, engaging a freelancer to write a mini-program or build a website, consulting a freelance advisor for foreign trade market planning, hiring a team to shoot product short videos, or inviting a teacher to provide e-commerce training—these all fall within the withholding scope. However, temporary labor, freight drivers, and rental income from individual landlords do not belong to the above 7 categories and are not subject to this withholding method.
How to calculate? The formula is simple
Article 2 of Announcement No. 28: VAT to be withheld = Sales amount × Prescribed collection rate. Additionally, Article 4 requires that when withholding VAT, additional taxes and fees (urban construction tax, education surcharge, local education surcharge) must also be withheld simultaneously.
Let's do the math: You hire a freelance designer to do packaging design, and you agree to pay 10,300 CNY (including tax). Using a 3% collection rate, the sales amount = 10,300 ÷ 1.03 = 10,000 CNY, and the VAT to be withheld is approximately 300 CNY. If the current preferential rate of 1% for small-scale taxpayers (Announcement No. 19 of 2023 by the Ministry of Finance and the State Administration of Taxation, effective until December 31, 2027) applies, then it would be approximately 100 CNY, plus additional taxes and fees. After completing the withholding, the other party can issue an invoice, ensuring your pre-tax deduction is in place.
III. When and how to file?
- Tax period is one month: Within 15 days from the 1st day of the following month after a taxable transaction occurs, the withholding agent must file a withholding declaration and pay the tax to the competent tax authority (Articles 5 and 6).
- The tax amount should be calculated based on the information provided by the individual, and shall not be altered without authorization (Article 9).
- If a transaction has already been subject to withholding, the individual does not need to pay tax again when applying for an invoice; if the other party has not issued an invoice, you can initiate an invoice reminder (Article 5).
- In case of returns, discounts, or termination, where the withheld tax amount changes, the current withholding declaration must be corrected (Article 7).
A special reminder under Article 6: Even if the sales amount for the day does not reach the threshold for per-transaction taxation, or is eligible for VAT exemption, the withholding agent must still file a declaration—it's not that they don't need to file, but rather that they may not have to withhold tax. The specific threshold is determined by current regulations.
Four, Two Situations to Distinguish
| Situation | Applicable to This Regulation |
|---|---|
| An entity pays an individual for design, consulting, training, and six other types of services | ✅ Entity withholds and remits tax |
| Practitioners within an internet platform engage in taxable transactions through the platform, and the platform has filed the declaration as required | ❌ Not applicable (Article 14) |
| Transactions occurring between January 1, 2026, and October 31, 2026 | The individual files the declaration according to Article 44 of the Implementation Regulations of the Value-Added Tax Law |
In other words, for transactions before November 1, 2026, individuals are still responsible for filing; after November 1, 2026, the responsibility falls on the paying entity.
Five, What Happens If You Don't Comply?
Article 13 clearly states: For situations such as failure to withhold tax, failure to file a withholding declaration as required, non-payment or underpayment of withheld tax, and misuse or impersonation of another's identity, the competent tax authority will handle them according to the Tax Collection and Administration Law and other relevant laws and regulations. For the withholding agent, the worst-case scenario is “money paid, no invoice, tax not withheld, and penalized.”
Additionally, Article 10 requires the retention of records related to withholding, legal vouchers, individual identity information, taxable transaction information, and settlement payment records; Article 11 requires the confidentiality of individual identity information, etc.
Six, Frequently Asked Questions by Yiwu Business Owners
Q1: Do I need to withhold tax when I make a payment to an out-of-town individual designer?
A: As long as the other party is a domestic individual providing one of the seven types of services mentioned, you, as the buyer of the taxable transaction, must withhold tax according to the regulations, regardless of whether the individual is in Yiwu or Zhejiang.
Q2: Do I need to withhold tax for rent received by an individual landlord or for temporary workers moving goods?
A: These two categories do not fall under the services listed in Announcement No. 28, so this method does not apply. However, other tax obligations must still be handled according to relevant regulations, and cannot be generalized.
Q3: If the other party says they will go to the tax bureau to issue an invoice, can I ignore it?
A: For transactions after November 1, withholding and filing are your legal obligations, and cannot be avoided by relying on the other party to fulfill them.
Q4: Do I also need to withhold tax for platform streamers and ride-hailing drivers?
A: According to Article 14, if the internet platform company handles the declaration on behalf of the practitioners within the platform, this regulation does not apply.
Q5: Is it too late to make up for the deductions that were not made in the past?
A: If you find that deductions should have been made but were not, it is important to correct and make up for them as soon as possible. The earlier you handle this, the lower the cost. It is recommended to first ask a professional institution to help you check your existing business.
Sources and References
- Announcement No. 28 of 2026 by the Ministry of Finance and the State Administration of Taxation on the Measures for the Withholding and Payment of VAT by Domestic Entities on Behalf of Individuals (财政部 税务总局公告2026年第28号《境内单位代扣代缴自然人增值税管理办法》)
- Announcement No. 19 of 2026 by the State Administration of Taxation (on declaration forms and supplementary materials) (国家税务总局公告2026年第19号（申报表及附列资料）)
- State Administration of Taxation · State Administration of Taxation Zhejiang Provincial Tax Service
A Few Final Words
The new regulations will take effect on November 1st, and those most affected will be the Yiwu business owners who frequently purchase services from individuals. It's easy to make mistakes when determining what to deduct, how to calculate the tax rate, and how to fill out the declaration forms for the first time. Jinfan (Yiwu) Tax & Finance Management Co., Ltd. has been rooted in Yiwu for 10 years and is familiar with the actual operating scenarios of merchants in the International Trade City, Huangyuan Market, and Beixiazhu. We can provide you with a 'withholding and payment health check': sorting out existing contracts, calculating tax burdens, and standardizing withholding and payment declarations, so that you pay clearly and manage risks effectively. Feel free to contact us if you need assistance.
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