China Terminates Tax Exemptions for Foreign Investors

China is abolishing tax exemptions for foreign individuals who obtain dividends and bonuses from foreign-invested enterprises, under a new tax regime that aims to make the wealthy pay more and narrow the income gap.


According to Caixin, a mainland business magazine, a tax rate of 20 percent currently applies to dividends and bonuses under the mainland's personal income tax law.

"Tax breaks are especially unwise given that many foreign investors in China shift profits overseas. The new plan is fairer as it ensures equal treatment of national and foreign investors," Liu Tianyong, a tax lawyer, told Caixin. "It was an outdated policy conceived during the planned economy period. It should have been abolished a long time ago."


Tax incentives and special treatment to foreign enterprises and individuals were offered by China to attract overseas investment as it introduced economic liberalisation.


The cancellation of tax exemptions for foreigners comes nearly 18 months after expatriate staff on the mainland were controversially required to join its pension system.


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