China Ends Tax Exemption on Dividend Income for Foreign Investors in Foreign-Funded Enterprises, Imposing 20% Tax

China has ended the dividend income tax exemption benefit previously granted to foreign investors in foreign-funded enterprises.

According to state-run Xinhua News Agency on the 1st local time, China's Ministry of Finance and the State Taxation Administration announced that starting today, foreign individuals must pay a 20% personal income tax on dividend income received from foreign-funded enterprises.

While China's personal income tax law applies a 20% tax rate to dividend income, China had exempted foreign investors from this tax for over 30 years since 1994, the early days of its reform and opening-up, to attract foreign investment.

Liu Yi, director of the Research Center for Chinese Fiscal and Tax Law at Peking University, stated, "While it played a positive role in attracting foreign investment at a specific stage," foreign capital now places greater emphasis on the overall business environment, such as the legal framework and market size, following the development of China's economy.

He further pointed out that "attracting foreign investment through unfair tax policies between domestic and foreign capital no longer aligns with the new circumstances."

(Photo: Getty Images)
※ Please note: This article was translated by AI and may contain errors.