If you hold China company shares in your own name as a foreign individual, the old dividend tax exemption has changed. Our advice is to check your next dividend first. Then review how you hold the shares. Do this before you are ready to send profits to shareholders, while you still have time to plan.
What changed on 1 September 2026?
China's Ministry of Finance and State Taxation Administration issued Announcement No. 27 of 2026. It took effect on 1 September 2026. Foreign individuals now pay 20% individual income tax on dividends from foreign-invested enterprises. The announcement repeals the former exemption. The company paying the dividend must withhold the tax. It must file and pay the tax by the 15th of the month after it pays the dividend. Read the official announcement
Under the latest rules and current practice, existing companies cannot keep using the former dividend exemption. This also affects profits from earlier years that have not yet been distributed. Apply the new rules when paying those profits to a foreign individual shareholder. If you transfer the shares first, calculate the share transfer taxes and fees separately.
Compare individual and company shareholders again
This change gives you a new reason to compare holding shares personally with holding them through an overseas company.
Under the general rules, an overseas non-resident company usually pays 10% China corporate income tax on dividends from a China company. This applies if it has no establishment or place of business in China. It also applies if the dividend has no effective connection to its establishment there. The 10% rate does not cover every overseas company. Tax guidance on dividends paid to non-resident enterprises
The example below covers only the China dividend stage. Assume the company has CNY 1,000,000 in after-tax profits that it can lawfully distribute. It pays out the full amount at the domestic rates shown, with no treaty relief:
| Shareholder receiving the dividend | China tax rate on the dividend | Tax withheld | Dividend after tax |
|---|---|---|---|
| Foreign individual | 20% | CNY 200,000 | CNY 800,000 |
| Overseas non-resident company meeting the conditions above | 10% | CNY 100,000 | CNY 900,000 |
We still need to check the shareholder's tax residence and any tax treaty or arrangement. We also check tax after the dividend reaches the overseas recipient. A passport or company registration certificate alone does not establish the right to treaty relief. The recipient must qualify, keep the required records and complete the filings. Rules for claiming treaty benefits
Our advice is to contact your tax adviser now. Review your plans for company profits and your ownership structure.
Can I transfer the shares to my own overseas company?
A share transfer may be an option, but it is more than a change of name on the shareholder register.
For an individual, the share transfer tax calculation starts with the transfer income from the China company shares. Deduct their original cost for tax purposes and reasonable expenses to find the taxable gain. The general domestic rate on that gain is 20% individual income tax. Do not compare the transfer amount only with the company's registered capital. See the share transfer tax rules and the Individual Income Tax Law.
The company's accumulated profits and assets may affect its share value. A transfer at your original investment amount is not automatically tax-free. This remains true if you control the Hong Kong or other overseas company receiving the shares. The tax authority may assess the transfer amount if the declared price is clearly too low without a valid reason. A routine tax review is not the same as a tax audit. Your records must still support the price and filing.
For a company that has traded and built up profits, we compare the cost of changing ownership now with the future dividend and funding benefits. Share transfer taxes and fees, ongoing costs and your plans for the funds can all change the conclusion.
What should I consider before setting up a China company?
Plan how you will use and distribute profits before the company earns them. But do not set up an overseas company simply because you see a difference between 20% and 10%.
We first look at three things:
- How the business works. What will the China and overseas companies each do? Who will sign contracts, receive and make payments, arrange staff and take responsibility for the business?
- How you will use the profits. Will you use them personally, or keep them in a company for purchases, investment and expansion into other markets?
- Whether you can maintain the arrangement. We check the shareholder's tax residence, the rules you plan to rely on, the records you will need and the overseas company's ongoing compliance costs.
You can also start with our Structure decision tool to explore initial choices for China and Hong Kong companies. Use it to organise your business and funding plans. We can then assess those plans against the shareholders' background, intended use of profits and latest rules.
Holding shares through an overseas company may be worth considering if you want to manage investments, receive dividends and reinvest over the long term. If the business is simple and you mainly want the profits for personal use, include the tax on funds reaching you and the extra management costs.
How does EZIPD turn policy changes into decisions?
We do not start processing a change simply because someone asks, "Please make my Hong Kong company the shareholder."
We call this work Structure Intelligence. We connect your actual business, the shareholders' roles and your plans for profits. We use the rules and our practical experience to explain the choices and their conditions. Then we help put the chosen plan into practice.
For an existing company, we first review who holds the shares and how the business operates. We check which profits it can distribute and where you want to keep the funds. We compare keeping the current arrangement with changing it on the same basis.
Once you choose a direction, we coordinate the necessary professional checks, documents, filings and changes. We also prepare for later dividends and the bank's document requirements. You confirm the business facts and the plan, then provide the required authority and signatures. The tax authority and bank each review the matters they are responsible for.
Good decisions need enough information, early preparation and a fresh review when conditions change. That is the value of EZIPD's decision engine. We explain the rule, assess its impact on your company and help you plan the next step.
Design First, Action Follow continues after a company is set up. Changes in the business, shareholder goals or policy can call for a new review.
To discuss how this change affects your company, tell us who holds the shares: an individual or a company. Please also tell us where the shareholder is tax-resident. Add your planned dividend date and how you intend to use the profits. We can then assess whether to focus first on the next dividend or carry out a wider ownership review.
Apply for a Confidential Strategic Review
If a Hong Kong company already holds the shares and you are preparing an actual dividend, read Paying Dividends from China to Hong Kong: What to Prepare First.
Policy checked on 3 November 2026. This article explains the general rules and how EZIPD assesses the choices. We need to check the facts before confirming tax amounts or implementation steps.