Tax Exemptions on Reinvested Profits

Tax Exemptions on Reinvested Profits
On 28th December 2017 the Ministry of Finance, the State Administration of Taxation, the National Development and Reform Commission and the Ministry of Commerce jointly released a notice allowing deferment of tax on dividends.

Cai Shui [2017] No. 88 (Notice 88) allows a non-resident enterprise to defer payment of tax on dividends derived from a Chinese enterprise if, among other things, the non-resident enterprise directly reinvests the dividends into industries “encouraged” by the Chinese government. On 2nd January 2018, SAT released implementation guidelines for Notice 88 in its Announcement [2018] No.3.

Foreign direct investment (FDI) into the Chinese mainland rose 9.8% year on year to reach 803.62 billion yuan (around 122 billion U.S. dollars in the first 11 months, faster than the 1.9% year-on-year increase registered in the first 10 months, according to data from the Ministry of Commerce.

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