A new corporate income tax credit for foreign investors reinvesting dividends from Chinese companies, retroactive from 1 January 2025 to 31 December 2028, offers a 10% credit to offset current-year tax payable.
China’s State Administration of Taxation, the Ministry of Finance and the Ministry of Commerce, has jointly issued Announcement No. 2 of 2025 on 27 June 2025, introducing a 10% corporate income tax credit for foreign investors who reinvest dividends or profit distributions from Chinese companies.
The policy applies retroactively from 1 January 2025 and is valid until 31 December 2028.
Foreign investors receive a tax credit equal to 10% of their reinvestment amount, which can offset their current year’s tax payable. If a tax treaty sets a lower rate on dividends or equity income, the lower rate applies. Unused credits can be carried forward, even beyond 2028.
Qualifying reinvestments for the credit include increasing investments in the paid-in capital or capital reserves of resident enterprises in China. They also cover making investments in new resident enterprises in China and acquiring equity interests in resident enterprises in China from non-related parties.
Reinvestments are excluded unless in listed enterprises as qualified strategic investments. They must target activities in the Catalogue of Encouraged Industries for Foreign Investment and be held for at least 5 years.
The qualifying tax payable for offset by the reinvestment credit includes taxes on dividends, interest, royalties, and other income earned by foreign investors from profit-distributing enterprises, applicable after the reinvestment date.
