China has introduced a 20% individual income tax rate on dividends and bonuses paid by foreign-invested enterprises to foreign individuals, alongside new withholding and filing obligations for paying enterprises effective 1 September 2026.
China’s Ministry of Finance and State Taxation Administration released Announcement No. 27 on 1 September 2026, revising how foreign individuals are taxed on dividends and bonuses received from foreign-invested enterprises operating in China.
20% flat tax on dividend distributions
Foreign individuals receiving dividends or bonuses from foreign-invested enterprises now face a standard 20% individual income tax rate under the “interest, dividends and bonuses” category. This applies across all qualifying payments regardless of source or amount.
Employer withholding and filing requirements
Foreign-invested enterprises paying dividends to foreign individuals bear responsibility for withholding the tax and remitting it on behalf of the recipient. The enterprise must file a tax return within 15 days following the month in which the payment occurs.
If the enterprise fails to withhold funds, the foreign individual must settle the tax liability independently.
The deadline for voluntary payment runs through 30 June of the following calendar year, though the tax authority can issue a notice requiring earlier payment within a specified timeframe, which the individual must honour.
Effective date and previous regulation
The update simultaneously repealed Article 2, Paragraph (8) of the “Notice of the Ministry of Finance and the State Administration of Taxation on Several Policy Issues Concerning Individual Income Tax” (Cai Shui Zi [1994] No. 20), which had governed this area since 1994.
The announcement took effect on 1 September 2026.
