IMPLEMENTATION LEVEL

National

AFFECTED FLOW

Inflow

ANNOUNCED AS TEMPORARY

No

NON-TRADE-RELATED RATIONALE

No

ELIGIBLE FIRMS

all

JUMBO

No

TARIFF PEAK

No
← back to the state act
Inception date: 01 Jan 2017 | Removal date: open ended
Still in force

FDI: Financial incentive

On the 28th of December 2017, four Chinese ministries* announced that they would be retroactively implementing a policy first announced in August of the same year (see related state act), whereby profits gained by foreign investors from Chinese investment project would be eligible for a deferral of 10% of the witholding tax on said profits when directly reinvested into encouraged projects.

Four conditions must be met for the deferral to be applicable:

  • The distributed profits must be used in a 'direct equity investment';
  • The distributed profits (cash or non-cash assets) derived by the foreign investor must be dividends or other equity investment income arising from the actual distribution of the retained earnings realized by the PRC resident enterprise in China, including undistributed earnings from previous years;
  • Reinvestment must be transferred directly from the profit-distributing enterprise to the invested enterprise or equity transferer;
  • Reinvestment must be a direct investment in encouraged investment projects.

The policy came into effect retroactively from 1 January 2017.


*Ministry of Finance, State Administration of Taxation (SAT), National Development and Reform Commission and Ministry of Commerce

AFFECTED COUNTRIES

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