Dividend tax on foreign individuals in China: Tax exemption abolished from September 2026
Effective from 1 September 2026, dividend income obtained by foreign individuals from foreign-invested enterprises in China will be subject to individual income tax at a rate of 20%. This abolishes a 30-year tax exemption. Ecovis experts explain the new rules.
For more than three decades, dividends distributed by foreign-invested enterprises to foreign individual shareholders were not subject to individual income tax within China.
This dividend tax exemption policy has officially come to an end (Announcement No. 27 of 2026 from the Ministry of Finance and the State Taxation Administration).
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Impact on foreign business operators in China
With the new regulation now in effect, the situation has fundamentally changed:
- Withholding obligation: When a foreign-invested enterprise pays dividends to a foreign individual, it must withhold the tax and complete the filing and remittance within 15 days of the month following the dividend payment.
- Fallback tax liability: The enterprise may fail to withhold the tax. In that case, the foreign individual must file and pay the tax on their own. The deadline is 30 June of the year following receipt of the income. If the tax authority separately specifies a payment deadline, the shareholder must pay within that deadline.
- Legal basis: This announcement took effect on 1 September 2026, and simultaneously repeals Article 2, Item (8) of the 1994 “Notice of the Ministry of Finance and the State Taxation Administration on Several Policy Issues Concerning Individual Income Tax” (Cai Shui Zi [1994] No. 20).
We support you in ensuring proper compliance with the new tax regulations.
Pingwen Hu, Senior Partner and Certified Public Accountant, ECOVIS Ruide Certified Public Accountants Co., Ltd, Shanghai, China
What companies should do now
Foreign individuals in foreign-invested enterprises and company finance teams should take this policy change seriously. And companies planning ownership structures for investments in China must take the expiration of this exemption/waiver into account.
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