of cash dividends to an investor's
home country provided that the proper
protocol is followed. However the web
of regulations pertaining to repatriating
dividends may appear to be unclear,
confusing and even contradictory to
the average investor. This is where
many individuals become hesitant or
apprehensive about involving themselves
with foreign investment enterprises
("FIE" or "FIEs") in China. The ability
to remit liquid dividend-based capital
is of paramount importance. This
article serves to allay fears related to
the repatriation of cash dividends, and
inform the investor about the current
state of dividend taxation in China.
In 1998, the State Administration of
Foreign Exchange ("SAFE") published
the Relevant Questions Concerning
the Remittance of Profits, Dividends,
and Bonuses Out of China Through
Designated Foreign Exchange Banks
Circular (No. 29 of 1998; hereinafter
"Circular 29"). Compared with the
the documentary requirements necessary
before the remittance of dividends
was permissible. Further laws and
regulations have been promulgated since
the late 1990s, however the process and
documentation required by Circular
29 have remained effective until now,
and are detailed on the following pages.
Additional publications are as follows,
and it may behoove the investor to
obtain English language copies of the
proceeding documents:
Stock Dividends and Stock Bonuses
Processed by Designated Foreign
Exchange Banks in 1998
People's Republic of China in 2008
"Circular on Issues concerning
Stock Dividends and Stock Bonuses
Processed by Designated Foreign
Exchange Banks in 1999
in 1997
on Several Preferential Policies in
Response of Enterprise Income Tax
in 2008
issued the Notice of the Ministry of
Finance and State Administration of
Taxation on Several Preferential Policies
in Response of Enterprise Income Tax in
2008, a 10 percent withholding tax on
dividends paid to nonresident compa-
nies and their individual shareholders
was introduced, it should be noted that
dividends paid out of pre-2008 earnings
continue to be exempt from withhold-
ing tax. The 10 percent withholding tax
may be reduced under an applicable tax
treaty, depending on any trade agree-
China-based Investments
Law Offices. He has practiced law for 20 years, with extensive
experience in foreign investment, banking and finance, mergers &
acquisitions, real estate and commercial litigation and arbitration.
Suites 2301-2302, Summit Center
1088 YanAn Xilu 200052, Shanghai, P.R.C.
86 21 62262625 Phone
86 21 32200273 Fax
edward.sun@hengtai-law.com
www.hengtai-law.com