According to Xinhua News report on September 1, 2026, the Ministry of Finance and the State Taxation Administration jointly announced that dividends received by foreign individual shareholders from foreign-invested enterprises (WFOE) will no longer be exempt from Individual Income Tax (IIT) starting from September 1, 2026. Such income will now be subject to IIT at a flat rate of 20% under the category of "Interest, Dividends, and Bonuses."
据新华社2026年9月1日报道，财政部、国家税务总局联合发布消息：自2026年9月1日起，外籍个人从外商投资企业取得的股息、红利所得，不再免征个人所得税，改按"利息、股息、红利所得"项目缴纳个人所得税，适用20%税率。
Background & Policy Basis
Since 1994, China has granted a temporary exemption on IIT for foreign individuals receiving dividends and bonuses from WFOE. The historical policy basis was:
自1994年起，我国对外籍个人从外商投资企业取得的股息、红利所得暂免征收个人所得税。该政策的历史依据为：
Circular of the Ministry of Finance on the Policy of Individual Income Tax (Caishuizi [1994] No. 20), Article 2(8)
《财政部 国家税务总局关于个人所得税若干政策问题的通知》（财税字〔1994〕20号）第二条第（八）款：
"外籍个人从外商投资企业取得的股息、红利所得暂免征收个人所得税。"
"Dividends received by foreign individuals from foreign-invested enterprises shall be temporarily exempted from Individual Income Tax."
What's Changed?
Impact on Foreign Investors
1. Direct Cost Increase
A foreign shareholder receiving RMB 1,000,000 in dividends will now face an IIT liability ofRMB 200,000(20%), reducing net proceeds to RMB 800,000.
2. Compliance Burden
WFOE must now act aswithholding agentsand deduct 20% IIT before remitting dividends to foreign individual shareholders.
3. Treaty Benefits
Foreign shareholders from jurisdictions with double taxation agreements (DTA) with China may still apply for reduced withholding rates, subject to treaty relief procedures.
What Should You Do?
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Immediate Review
Maintain records of shareholder identity, capital contribution certificates, and board resolutions to support any future treaty claims or audits.
source: Xinhua
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