China rolls out 10 percent tax credit for foreign investors reinvesting dividends

China's finance, taxation, and commerce authorities on Monday unveiled a tax incentive granting foreign investors a 10 percent corporate income tax credit on direct domestic investments funded by dividends from Chinese resident companies.

The measure, which takes effect from Jan. 1, 2025 through Dec. 31, 2028, allows unused credits to be carried forward and applies lower rates under existing tax treaties.

Eligible investors may reinvest dividends in equity capital increases, new resident enterprise establishments, or acquisitions of resident enterprise shares from non-affiliated parties. The industries or sectors in which the invested enterprise operates must be listed in the Catalogue of Encouraged Industries for Foreign Investment.

Investors can apply retroactively for qualifying reinvestments made between Jan. 1, 2025, and the policy's announcement date.