Date: June 27, 2025

Issued by: Ministry of Finance, State Taxation Administration, and Ministry of Commerce, P.R.C.

Effective Period: January 1, 2025 – December 31, 2028

China has officially launched a new tax incentive policy aimed at encouraging foreign investors to reinvest their profits back into China. This initiative reflects Beijing’s ongoing effort to attract long-term foreign capital, boost domestic innovation, and enhance confidence among multinational enterprises operating in the country.

? Policy Highlights

Under the new regulation, foreign investors who choose to reinvest their distributed profits — such as dividends earned from Chinese subsidiaries — into eligible domestic projects may apply for a tax credit of up to 10% of the reinvested amount.

This credit can be used to offset tax liabilities related to dividends, interest, or royalties payable by the investor.

The policy applies to reinvestments made between January 1, 2025, and December 31, 2028, and aims to:

● Encourage multinational corporations to expand their footprint in China;

● Support high-quality, sustainable foreign direct investment (FDI);

● Facilitate the reinvestment of profits into manufacturing, R&D, and technology sectors.

? Strategic Implications for Global Businesses

This new tax incentive signals that China continues to open its economy and improve its business environment for global investors. Companies that are planning to scale operations, develop new projects, or participate in joint ventures may now benefit from reduced tax costs when reinvesting local profits.

For corporate financial planners, the incentive could also:

● Improve post-tax return on investment (ROI);

● Encourage local expansion using retained earnings;

● Enhance overall tax efficiency in cross-border group structures.

? Implementation and Compliance

Eligible investors must meet the specific criteria set by the Ministry of Finance, the State Taxation Administration, and the Ministry of Commerce. Documentation supporting the reinvestment purpose, amount, and timeline will be required during tax filing.

Enterprises are advised to:

● Consult their tax advisors or auditors to assess eligibility;

● Prepare reinvestment plans and documentation early;

● Monitor follow-up guidelines and provincial-level implementation details.

✳️ Our Take

The introduction of this policy demonstrates China’s continued commitment to creating a more transparent and predictable investment environment. By providing tangible tax benefits, the government is encouraging foreign enterprises not only to stay, but to grow — turning profits into productive capital that contributes to the country’s long-term economic development.

In general, reinvesting your profits in China is now more rewarding than ever — with a potential 10% tax credit awaiting qualifying investors.