📊 China Tax and Payroll

China to tax foreign individuals' dividends from foreign-invested enterprises

China's Ministry of Finance and State Taxation Administration have revoked the long-standing individual income tax exemption on dividends and bonuses paid to foreign individuals by foreign-invested enterprises, effective September 1, 2026. A 20% tax will now be withheld on such income. Officials say the actual tax burden for most foreign shareholders will not increase because taxes paid in China can be credited against home-country tax liabilities under worldwide taxation systems. The change aims to equalize treatment between domestic and foreign investors and close tax loopholes.

China taps AI for tax system modernization drive

China’s State Taxation Administration is expanding its annual Spring Breeze tax service campaign with 16 measures that use AI large models to improve tax filing, taxpayer support, and compliance. The measures include AI assistants, 24/7 chatbots, expanded IIT auto-filling, bilingual services for foreign enterprises and expatriates, paperless departure tax refunds, and early risk alerts. The goal is to cut waiting times, simplify procedures, and shift supervision toward proactive compliance. Nationwide rollout is underway, with local pilots in Shenzhen, Zhaoqing, Hainan, and other regions.

China further streamlines departure tax refund services

China's State Taxation Administration will digitize departure tax refunds for overseas visitors, allowing electronic transfer of applications and invoices to support paperless processing. From September 1, participating tax refund stores can share visitors' ID documents with refund agencies online for faster review, and a nationwide QR code service will let visitors submit refund details electronically. The agency also warns of stricter action against fraudulent refund schemes and smuggling, with stores involved facing disqualification.

BRI forum calls for closer tax cooperati...

The Belt and Road Initiative (BRI) forum has issued a call for enhanced tax cooperation among participating countries, emphasizing the need to reduce tax barriers and facilitate cross-border trade and investment. This signals China's continued push for multilateral tax collaboration but does not create immediate compliance obligations. It is a diplomatic communiqué rather than an enforceable policy change.

Multilateral Convention on Mutual Administrative Assistance in Tax Matters

This policy concerns China's participation in the Multilateral Convention on Mutual Administrative Assistance in Tax Matters, an international framework developed by the OECD and Council of Europe. It allows tax authorities of participating jurisdictions to cooperate by exchanging taxpayer information and providing administrative help to prevent tax evasion and avoidance. China's adoption strengthens cross-border tax transparency and enforcement powers for its tax administration.

Income tax consequences of residency in China

This document explains how China determines an individual's tax residency status and the resulting income tax obligations. Individuals who are domiciled in China or spend 183+ days per year in the country are taxed on worldwide income, while non-residents are generally taxed only on China-source income. A special exemption allows expatriates to avoid Chinese tax on foreign-source income paid by foreign employers during their first years of Chinese residence. Employers and foreign employees need to track presence in China carefully because residency status drives payroll withholding and annual filing requirements.