China Ends 32-Year Dividend Tax Exemption for Foreign Shareholders

China has ended its 32-year tax exemption on foreign individual dividends. Overseas Chinese in Denmark and Sweden with investments in China face new taxes. The change took effect on 1 September 2026 under Announcement No. 27. It repeals a tax exemption rule active since 1994. Foreign passport holders now pay a 20 percent Individual Income Tax on dividends. Paying companies must withhold the tax at source immediately. They must remit the tax by the 15th of the next month. If a company fails to withhold, shareholders pay by 30 June next year.

Double taxation treaties may reduce this 20 percent tax rate. Tax residents of Denmark or Sweden can use local tax treaties with China. Treaty benefits can cap the dividend tax rate below 20 percent. You must check if China considers you a Chinese tax resident. Chinese tax residents cannot claim these foreign tax treaty benefits. Corporate holding structures face strict rules under Announcement No. 9 of 2018. Holding companies must qualify as beneficial owners to lower withholding rates. Controlled foreign company rules in Denmark or Sweden may also apply to earnings. Local investors should review their holdings according to R&P China Lawyers.