From 1 September 2026, dividends and bonuses that foreign individuals receive from foreign-invested enterprises in China are subject to a 20 percent individual income tax. The exemption being withdrawn was introduced in 1994 and had run for 32 years.
The change was issued jointly by the Ministry of Finance and the State Taxation Administration. It applies to foreign individuals — not to the enterprises themselves — and covers dividend and bonus income distributed by foreign-invested enterprises.
The exemption dates from a period when China was actively courting foreign capital. Liu Yi, director of the China Center for Public Finance and Taxation at Peking University, said the waiver “played a positive role in attracting foreign capital during a specific phase of development.”
On what the change means going forward, Chinese specialists quoted in state media frame it as an equal-treatment measure rather than a tightening of policy toward foreign investment. Li Xuhong, vice president of the Beijing National Accounting Institute, said that “when an economy reaches a certain stage of development, it generally no longer depends on tax incentives to draw foreign investment,” and argued the actual tax burden for foreign individual shareholders will not increase, because residents of major Western countries are already taxed on worldwide income and China’s credit system offsets the additional liability. That argument is hers; how it applies to any individual depends on the tax treaty and residence position involved.
References
People’s Daily Online – China to tax foreign individuals’ dividends from foreign-invested enterprises / Bloomberg Tax – China Removes Tax Exemption on Foreigners’ Dividend Incomes
