As an important tool for reducing taxes and fees in China, the VAT rate adjustment has had a significant effect since the previous reforms. Based on the panel data of A-share listed companies from 2015 to 2019, this paper uses the Time-varying DID method to test the impact of VAT rate adjustment on firm performance. The results of the study show that the VAT rate adjustment significantly improves the firm performance. Mechanism analysis shows that the VAT rate adjustment can improve firm performance by reducing firm’s VAT tax burden and increasing firm’s internal cash flow. Heterogeneity analysis shows that the promotion effect of VAT rate adjustment on firm performance is more significant in enterprises with strong tax burden transfer ability and high cash flow uncertainty. In addition, based on the differences in the structure of firm’s purchase and sales, this paper finds that the VAT rate adjustment only has a positive impact on the firm performance with high output tax rates, and significantly increases the value-added tax burden of enterprises with low output tax rates and high intermediate input rates. This paper finds the existence of the “asymmetric tax reduction bonus” of VAT rate adjustment, which provides the policy reference for optimizing the value-added tax system in China.