On 1 September 2026, the Ministry of Finance and the State Taxation Administration issued Announcement No. 27 [2026], clarifying the Individual Income Tax (IIT) treatment of dividends and bonus income received by foreign individuals from foreign-invested enterprises in China.
Key Points
20% IIT rate on dividends
Dividend and bonus income received by a foreign individual from a foreign-invested enterprise is subject to Individual Income Tax under the category of “income from interest, dividends and bonuses”, at a 20% tax rate.
Withholding obligation of the paying company
When a foreign-invested enterprise pays dividends or bonuses to a foreign individual, the enterprise is required to withhold and remit the applicable IIT and file the relevant tax declaration within 15 days of the following month after the income is paid.
Tax payment where withholding does not occur
If the foreign-invested enterprise fails to withhold the tax, the foreign individual receiving the dividend or bonus income is responsible for paying the tax by 30 June of the following year.
Where the tax authority issues a notice requiring payment within a specified period, the individual must comply with the deadline stated in the notice.
Effective Date and Repeal of Previous Provision
The Announcement applies from 1 September 2026.
At the same time, Item 8 of Article 2 of the Notice of the Ministry of Finance and the State Taxation Administration on Certain Policy Issues Concerning Individual Income Tax (Cai Shui Zi [1994] No. 20) is repealed.
Tax Treaty Relief
Depending on the country of residence of the foreign individual, a reduced withholding tax rate or other tax relief may be available under the applicable double taxation treaty between China and the individual’s country of tax residence. Such treaty relief may reduce the 20% domestic tax rate otherwise applicable to the dividend income.
The availability and extent of such treaty benefits will depend on the specific provisions of the applicable treaty, as well as on the individual’s tax residence status and the relevant procedural and documentation requirements.
Practical Implications
Foreign individuals receiving dividends from foreign-invested enterprises should review the tax treatment applicable to their dividend income and, in particular, confirm whether the paying enterprise has properly fulfilled its withholding and filing obligations.
Foreign-invested enterprises making dividend payments to foreign individuals should also ensure that the applicable withholding, remittance and reporting procedures are properly implemented from the effective date of the new Announcement.
Source: Ministry of Finance and State Taxation Administration, Announcement No. 27 [2026], dated 1 September 2026.