China Ends E-cigarette Export VAT Rebates Effective April 1, 2026

Beijing, January 8, 2026 – In a significant policy update, China's Ministry of Finance (MOF) and State Taxation Administration (STA) jointly issued Announcement No. 2 of 2026 on January 8, outlining adjustments to the value-added tax (VAT) export rebate policies for certain products. The changes, effective from April 1, 2026, include the cancellation of VAT export rebates for photovoltaic ("PV") and related products, as well as phased reductions for battery products.

While the primary focus is on PV and battery sectors, industry sources and market reactions indicate that e-cigarettes (including vaping devices, e-liquids containing nicotine, and non-combustible nicotine inhalation products under HS codes such as 2404.12 and 8543.40) are also affected under the broader "PV and similar products" category or related adjustments. This marks a shift from the previous 13% VAT export rebate rate commonly applied to e-cigarette exports, which has been a key support for China's dominant position in the global vaping market (accounting for over 90% of worldwide production).

Key Policy Details

• Effective Date: April 1, 2026.
• Cancellation Scope: Full removal of VAT export rebates for photovoltaic products and similar items (specific product lists detailed in the announcement's Attachment 1). This extends to certain non-combustible nicotine products like e-cigarettes, as confirmed by industry analyses and stock market responses (e.g., shares of major players like Smoore International dropped significantly following the news).
• Battery Products (Phased Approach): From April 1 to December 31, 2026, the rebate rate drops from 9% to 6%; full cancellation begins January 1, 2027 (Attachment 2 lists affected items).
• Consumption Tax Unaffected: For products subject to consumption tax (including e-cigarettes at production/wholesale levels), export consumption tax rebate/exemption policies remain unchanged.
• Rebate Determination: Applicable rates are based on the export declaration date noted on the customs bill.

Industry Implications

China's e-cigarette sector, heavily export-oriented (with major markets in the US, Europe, and emerging regions), has long benefited from the 13% VAT rebate to offset domestic costs and maintain competitive pricing. The removal of this incentive is expected to:

• Increase export costs, potentially compressing profit margins for manufacturers and exporters.
• Prompt a pre-April 2026 export surge as companies accelerate shipments.
• Accelerate industry consolidation, favoring compliant, high-quality producers while pressuring smaller players amid global regulatory tightening (e.g., US tariffs, EU flavor bans, and PMTA requirements).

This adjustment aligns with China's broader strategy to moderate high-export sectors, reduce trade frictions, and promote industrial upgrading—similar to recent reforms in PV, batteries, and other strategic goods. For e-cigarette firms, the policy underscores the need for enhanced innovation, supply chain optimization, and diversification into emerging markets.

Enterprises are advised to review their product classifications, consult professional customs brokers, and monitor official updates via the China International Trade Single Window or local tax authorities for precise implementation details.

The full announcement (including product lists) is available on the MOF and STA websites. Industry stakeholders should prepare for compliance and potential cost adjustments ahead of the April 1 deadline.