China Ends Tax Exemption on Foreign Dividend Payments

The Government of China ended a decadeslong tax exemption on dividend payments made by foreign-invested enterprises to foreign individuals effective September 1, 2026. The Ministry of Finance and the State Taxation Administration announced the policy change to close tax loopholes and increase domestic revenues.

Under the new regulations, the government will impose a 20% individual income tax on these dividends, aligning the tax burden for foreign investors with that of local citizens. The measure specifically targets high-net-worth individuals and companies that utilize red-chip structures or variable interest entities to repatriate profits.

To ensure compliance, enterprises are now required to withhold the tax at the time of payment and remit it by the 15th of the following month. In cases where the enterprise does not withhold the tax, the individual investors must pay the tax directly by June 30 of the following year.