emirates7 - China’s State Taxation Administration (STA) has issued detailed guidelines for foreign investors seeking tax credits on reinvested dividends, outlining how to access preferential tax benefits under a recently introduced policy, according to Xinhua News Agency.

In June, Chinese authorities in finance, taxation, and commerce announced a tax incentive that grants foreign investors a 10% corporate income tax credit when they use dividends from Chinese resident enterprises for direct domestic reinvestment.

This policy, effective from January 1, 2025, through December 31, 2028, permits unused tax credits to be carried forward and incorporates reduced rates under applicable tax treaties.

A notice from the STA, released Thursday, stated that profits used to pay subscribed registered capital, or to raise paid-in capital or capital reserves, are considered valid forms of reinvestment.

The notice further defined the practical framework for implementing the incentive, including how to define the reinvestment holding period, how to calculate eligible tax credit amounts, and the procedures for claiming the credits.

This initiative is part of China’s broader effort to attract foreign capital. Reinventment by overseas investors under the country’s tax deferral scheme surged in 2024, earlier STA data showed.