The relaxation of the rules comes after almost a year of consultation between Chinese tax authorities, tax experts and companies. The effect will be to make it much simpler and quicker to cut withholding taxes paid on dividends from 10 per cent to as little as 5 per cent, depending on the owner’s country of residence.
Last year almost $65bn worth of dividends was repatriated, according to the State Administration of Foreign Exchange, which manages the bulk of China’s foreign exchange reserves. KPMG said official data showed that Rmb45bn ($8.6bn) of withholding taxes were collected last year, which accounted for more than half of total corporate taxes paid in China by foreign companies.
Withholding tax reductions were first introduced in late 2009, but companies had to meet a long list of criteria that the vast majority failed to satisfy. Any company listed and resident in a country with a tax treaty with China will now automatically qualify for the relief on dividends from Chinese operations or wholly owned subsidiaries, according to two regional governments.
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