On September 1, 2026, the Ministry of Finance and the State Taxation Administration jointly issued the Announcement on Matters Concerning the Individual Income Tax Policy on Dividends and Bonuses for Foreign Individuals (Announcement No. 27 of 2026 of the Ministry of Finance and the State Taxation Administration, hereinafter referred to as “Announcement No. 27”), effective from the date of issuance.
Policy Content
The matters concerning the individual income tax policy on dividends and bonuses for foreign individuals are hereby announced as follows:
Income from dividends and bonuses obtained by foreign individuals from foreign-invested enterprises shall be subject to individual income tax under “income from interest, dividends and bonuses,” at a tax rate of 20%.
When a foreign-invested enterprise pays dividends and bonuses to a foreign individual, it shall withhold and remit the tax, and file and pay tax within 15 days of the following month in which the income is paid. If the foreign-invested enterprise fails to withhold the tax, the foreign individual who obtains the dividends and bonuses shall pay the tax before June 30 of the following year in which the income is obtained; if the tax authority notifies him/her to pay within a time limit, the foreign individual shall pay the tax within the time limit specified in the notice.
This Announcement shall be implemented from September 1, 2026, and Item (8) of Article 2 of the 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Taxation Administration on Several Policy Issues Concerning Individual Income Tax (Cai Shui Zi [1994] No. 20) shall be repealed at the same time.
Key Points
I. Core Change: End of Tax Exemption, Tax Item and Rate Clarified
According to Article 1 of Announcement No. 27, income from dividends and bonuses obtained by foreign individuals from foreign-invested enterprises shall be subject to individual income tax under “income from interest, dividends and bonuses,” at a 20% tax rate.
After this adjustment, dividends obtained by foreign individual shareholders from foreign-invested enterprises will no longer enjoy special tax preferences, and the applicable tax rate will remain consistent with that applicable to general resident individuals obtaining dividends and bonuses from enterprises (resident individuals are subject to a 20% tax rate on dividends and bonuses, but listed companies have differentiated policies, which are not discussed here).
II. Tax Payment Obligations and Withholding Process: The Payer Bears the Primary Withholding Responsibility
Article 2 of the Announcement clearly divides the methods of tax payment:
Withholding and remittance (primary method)
Withholding agent: the foreign-invested enterprise (payer).
Withholding time: when paying dividends and bonuses to the foreign individual.
Filing deadline: file and pay tax with the competent tax authority within 15 days of the following month in which the income is paid.
Operational points: before actually paying dividends to the foreign shareholder, the enterprise shall first deduct 20% tax, pay the after-tax amount to the shareholder, and complete the withholding filing within the prescribed time limit.
Self-filing (supplementary method)
Trigger conditions: the foreign-invested enterprise fails to perform its withholding obligation (e.g., failure to withhold, omission, refusal to withhold, etc.).
Taxpayer: the foreign individual who obtains the dividends and bonuses.
Filing deadline: file and pay tax with the tax authority before June 30 of the following year in which the income is obtained.
Special provision: if the tax authority notifies payment within a time limit, the taxpayer shall pay within the time limit specified in the notice, and shall not be subject to the June 30 of the following year limit.
Liability Reminder
If a foreign-invested enterprise, as a withholding agent, fails to withhold tax as required, it will face risks of tax repayment, late payment surcharges, and administrative penalties; if a foreign individual fails to self-file on time when the withholding agent has not withheld tax, he/she shall likewise bear corresponding legal liability.
III. Implementation Time and Transition Between Old and New Rules
Article 3 of the Announcement provides: it shall be implemented from September 1, 2026, and Item (8) of Article 2 of Cai Shui Zi [1994] No. 20 shall be repealed at the same time.
Timing criterion:
The time of actual payment of dividends and bonuses shall prevail, rather than the accounting year to which the profits belong.
Dividends and bonuses paid on or after September 1, 2026 (inclusive), regardless of whether they correspond to undistributed profits of previous years or current-year profits, shall be subject to the new policy and withheld at 20%.
Dividends and bonuses already paid before September 1, 2026 shall be subject to the original tax exemption policy and shall not be subject to retroactive taxation.
Key points for enterprise self-inspection:
Enterprises with dividends declared but not paid in previous years, or historical dividends intended to be paid after September 1, should sort them out as soon as possible and assess the tax burden impact.
IV. Chain Effects of Repealing the Old Policy
Announcement No. 27 only repeals Item (8) of Article 2 of Cai Shui Zi [1994] No. 20; other provisions of that document remain effective.
Original text of the repealed provision:
Income from dividends and bonuses obtained by foreign individuals from foreign-invested enterprises shall temporarily be exempt from individual income tax.
After the repeal, foreign individuals obtaining dividends and bonuses from foreign-invested enterprises will no longer have any special tax exemption treatment. For special situations such as indirect shareholding through partnership enterprises, or where the enterprise nature has been changed to domestic-invested but the shareholder is a foreign individual, the previously disputed positions in some regions may become unified due to the repeal of this tax exemption provision—that is, the exemption no longer applies and general provisions shall apply. However, specific implementation shall still be subject to the opinion of the competent tax authority.