China's Ministry of Finance and the State Taxation Administration jointly issued an announcement on September 1, clarifying that starting from that date, dividends and bonuses received by foreign individuals from foreign-invested enterprises will be subject to a 20% individual income tax rate.

Since 1994, China had provided a temporary exemption on individual income tax for dividend and bonus income obtained by foreign individuals from foreign-invested enterprises, as part of efforts to promote reform and opening up while attracting foreign investment.

With the establishment of a unified national market, China is progressively sorting out and standardizing preferential tax policies. Industry insiders indicate that the removal of the exemption for foreign individuals on dividends from foreign-invested enterprises will help uphold tax fairness and uniformity, advance the construction of a unified national market, and also close tax loopholes while enhancing the regulatory role of taxation.