China will scrap its 13% VAT export rebate for a product category that includes nicotine-based e-cigarettes from April 1, 2026, and will phase out rebates for certain battery products by 2027, according to tax authorities. Photo credit: Aleksander Dumała, Pexels.
China will eliminate its 13% VAT export rebate for a category that includes nicotine-based e-cigarettes and vaping devices. This change takes effect on April 1, 2026, as announced jointly by the country’s Ministry of Finance and the State Taxation Administration.
In Announcement No. 2 of 2026, the agencies stated that China will cancel VAT export rebates for “photovoltaic and other products,” with the affected items listed in an attached product schedule. Vaping product manufacturers say the loss of the rebate will increase costs.
“For affected exporters, this raises the export cost base and requires a reassessment of export pricing and commercial terms. From a global supply-chain perspective, the room for low-price competition will narrow materially,” according to the Hangsen Group, a global e-liquid solutions provider based in Shenzhen. “Buyers are more likely to favor suppliers with stable delivery, consistent quality, and strong execution, and orders may increasingly concentrate among leading players.”
That product list includes customs code 2404120000, described as “products for inhalation without combustion, containing nicotine, not containing tobacco or reconstituted tobacco.”
The most immediate impact of the policy change is pressure on profit margins for Chinese e-cigarette exporters. Removing the VAT rebate strips away a meaningful cost advantage, making Chinese-made products less competitive in overseas markets.
When export rebates apply, companies can partially offset the VAT burden, preserving pricing flexibility. Once those rebates are removed, that cushion vanishes. Industry estimates suggest the lost rebate amounts to roughly US$1.30 in profit per US$10 in exports, a sharp squeeze on gross margins. That level of compression is likely to force exporters to revisit their pricing strategies, cost structures, and the margin they can realistically absorb.
According to Hangsen’s website, the impact will not be uniform. It will vary by company and SKU, depending on several factors, including transaction structure, tax treatment, pricing terms, and payment conditions. In practice, companies are likely to respond in one of three ways:
- Passing costs on by raising prices or securing lower manufacturing costs
- Absorbing some of the impact through tighter cost control and operational efficiencies
- Reducing exposure by standardizing quoting practices and clearly allocating tax responsibility and price-adjustment mechanisms in contracts
Whether a factory can realistically absorb cost pressure depends on several factors: product differentiation, historical delivery performance, and whether its supply chain is built on a solid compliance foundation. For low-margin operators built around aggressive pricing, the room to maneuver narrows.
“In the near term, this may add upward price pressure in end markets and compress margins, leading to downward revisions in profit expectations, a shift that has already been clearly reflected in equity market performance,” the company states. “Over a longer cycle, as cost constraints tighten and procurement standards become more selective, low-quality and low-stability supply becomes harder to sustain.”
The same announcement also revises the export rebate policy for certain battery products. According to the notice, it reduces the VAT export rebate rate for listed battery products. Specific battery components in vaping hardware (if classified separately, such as unfilled devices) are subject to a different schedule. The rebate rate will be reduced from 9% to 6% from April 1, 2026, through December 31, 2026, and will be eliminated entirely on January 1, 2027.