January 2018 - Withholding Tax (“WHT”) Deferral for Foreign Re-investment in China

Under the Enterprise Income Tax Law before the change, dividends derived by a non-tax resident enterprise (“Non-resident entity”) are subject to a withholding tax at 10% unless a more favourable tax treaty benefit applies. In August 2017, the State Council released measures to improve the business environment for foreign investors in China, including the proposal to allow foreign investors to enjoy a withholding tax deferral treatment.

On 28 December 2017, four PRC government bodies, namely the Ministry of Finance (“MOF”), State Administration of Taxation (“SAT”), National Development and Reform Commission (“NDRC”) and Ministry of Commerce (“MOC”) jointly issued Caishui [2017] 88 (“Caishui 88”), which clarifies the criteria to enjoy the withholding tax (“WHT”) treatment, application procedures and responsibilities, and post-administration by the tax authorities.