China ends foreign-investor dividend tax exemption: what changes from September 2026

China has ended the long-standing individual income tax exemption for dividends and bonuses paid by foreign-invested enterprises to foreign individuals. From 1 September 2026, the domestic statutory rate is 20%. The paying foreign-invested enterprise is responsible for withholding the tax and filing it by the 15th day of the following month.

The change matters most to foreign individual shareholders, founders, entrepreneurs and executives who directly receive dividend or bonus distributions from a foreign-invested enterprise in China. It does not mean that all income earned by foreigners in China is now taxed at 20%.

What changed on 1 September 2026?

China’s Ministry of Finance and State Taxation Administration issued Announcement No. 27 of 2026 on 1 September. It states that dividend and bonus income received by a foreign individual from a foreign-invested enterprise is taxed under the “interest, dividends and bonuses” category at a 20% rate.

The announcement also repealed the part of a 1994 policy that had provided the exemption. The change took effect on 1 September 2026.

Official source: State Taxation Administration policy database, Announcement No. 27 of 2026.

Who is affected by China’s new dividend tax rule?

The rule applies to foreign individuals receiving dividends or bonuses from foreign-invested enterprises in China. It is aimed at dividend and bonus distributions, not ordinary salary income.

That distinction matters for international residents who may be both employees and shareholders. Salary, employment bonuses and other forms of income continue to follow their own Chinese individual income tax rules.

For foreign founders and business owners, the practical question is whether a payment is a covered dividend or bonus distribution from a foreign-invested enterprise. If the answer is unclear, the company and shareholder should confirm the treatment before making the payment.

Who must withhold and pay the tax?

The foreign-invested enterprise making the payment must withhold the tax and file and remit it by the 15th day of the month after the dividend or bonus is paid.

If the enterprise does not withhold the tax, the foreign individual who received the income must generally pay it by 30 June of the following year. If the tax authority sets a specific payment deadline, that deadline applies.

The same deadlines are summarised in the Shanghai Government’s English-language explanation.

Does every foreign shareholder necessarily pay 20%?

20% is the domestic statutory rate in the new announcement. The final tax position can be different where a relevant double-taxation agreement applies.

Treaty treatment depends on facts including the shareholder’s tax residence, the exact treaty, beneficial ownership and the type of payment. Babylon is therefore not treating any lower treaty rate as automatic. Foreign shareholders should check the treaty that applies to their own residence before relying on a reduced rate or credit.

What should foreign shareholders do now?

• Confirm whether a planned payment is a dividend or bonus covered by Announcement No. 27.
• Check whether the paying company has updated its withholding process for payments made from 1 September 2026.
• Confirm the shareholder’s tax residence and whether a relevant double-taxation agreement may apply.
• Keep records showing the payment date, gross amount, tax withheld and any treaty documentation used.
• Do not assume that the old exemption still applies to a payment simply because the company or investment was established before September 2026.

Why this matters for internationally mobile investors

The change alters the after-tax return that some foreign individual shareholders can receive from Chinese foreign-invested enterprises. It may also affect the way founders and investors plan distributions, especially where they live in another country and have cross-border tax obligations.

For people considering a business move to China, it is one more item to include alongside company structure, residence status and local compliance. Babylon’s guide to Chinese business culture covers some of the wider practical context for international professionals, while our guide to the best cities to live in China looks at relocation choices for newcomers and expats.

Frequently asked questions

When did the exemption end?

The new rule took effect on 1 September 2026.

What is the domestic tax rate?

The announcement sets a 20% individual income tax rate for covered dividend and bonus income received by foreign individuals from foreign-invested enterprises.

Does this apply to salaries?

No. Announcement No. 27 concerns dividends and bonuses from foreign-invested enterprises. Salary and employment income are dealt with under separate individual income tax rules.

Can a tax treaty reduce the rate?

Potentially, but not automatically. The result depends on the relevant treaty and the individual’s circumstances. Check the specific treaty and current Chinese procedure before relying on a reduced rate.

Last verified: 3 October 2026.

Featured image: Lujiazui financial district in Shanghai, photographed by Balon Greyjoy on 12 November 2019. CC0 1.0 via Wikimedia Commons. The image has been resized for display.

This article is general information for international residents and investors. It is not individual tax or legal advice.