China to Reinstate 20% Dividend Tax on Foreign Individuals From September 2026

From September 1, 2026, China will resume levying individual income tax on dividends and bonuses obtained by foreign individuals from foreign-invested enterprises. In 2026, the Ministry of Finance and the State Taxation Administration issued the Announcement on Matters Concerning Individual Income Tax Policy on Dividends and Bonuses for Foreign Individuals, repealing the 1994 preferential policy that temporarily exempted foreign individuals from individual income tax on dividends and bonuses from foreign-invested enterprises. Under the announcement, dividends and bonuses obtained by foreign individuals from foreign-invested enterprises are subject to individual income tax as income from interest, dividends and bonuses, at a rate of 20%.

The announcement showed that, because foreign individuals were previously exempt from individual income tax on dividends and bonuses from foreign-invested enterprises, companies distributing interim dividends to overseas individual shareholders on their H-share registers did not withhold or pay individual income tax on behalf of those overseas individual shareholders. That exemption has been repealed with effect from September 1, 2026. Accordingly, Yangtze Optical Fibre and Cable will, in accordance with the law, withhold and pay China individual income tax on the interim dividend for overseas individual shareholders listed on the company's H-share register on the dividend record date.

A supplementary announcement issued by Yangtze Optical Fibre and Cable showed that withholding arrangements for non-resident enterprise shareholders, including HKSCC Nominees Limited, other nominees, trustees or H-share holders registered in the name of non-individual shareholders, as well as Shanghai Stock Connect and Shenzhen Stock Connect shareholders, remain unchanged and continue to apply. According to the Dividend or Distribution (Announcement Form) published by Yangtze Optical Fibre and Cable on the same day, the declared interim dividend is RMB 1.06 per share, with a dividend payment date of November 10. On withholding tax on dividends, a 10% rate applies to non-resident enterprises (with registered addresses outside mainland China), a 20% rate applies to mainland individual investors investing in H shares of companies listed on the Hong Kong Stock Exchange through Shanghai-Hong Kong Stock Connect and Shenzhen-Hong Kong Stock Connect, and a 20% rate applies to non-individual residents (with registered addresses outside mainland China).