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China Restructures Its Dividend Tax

by Mary Swire, Tax-News.com, Hong Kong

20 November 2012


Following the approval of the State Council, China’s Ministry of Finance (MOF) has announced that, from January 1, 2013, the rate of withholding tax on dividends will be structured so as to depend on the length of time that the investor has held the shares.

At present, according to the provisions of the personal income tax code, the withholding tax rate levied on dividends and share bonuses received by Chinese investors from listed companies should be 20%. However, that was reduced to 10% in June 2005, in order to promote the development of the country’s stock markets.

It has now been agreed that, from the beginning of next year, investors who hold their shares for more than one year will only be charged a tax rate of 5%; those holding shares for from one month to one year will be taxed at the present rate of 10%; and those holding shares for one month or less will suffer the full tax rate of 20%.

It is hoped that, not only will the new dividend tax structure further encourage the development of Chinese stock markets, but also discourage short-term speculative investors and increase longer term investment.

TAGS: tax | investment | business | equity investment | China | ministry of finance | tax rates | withholding tax | dividends

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