Tax Update: New rules for the withholding tax obligations concerning dividends

A new notice published by the State Administration of Taxation on 17 October 2017 will change the time when dividends are taxed.


In general, all foreign companies, which receive dividends and other passive incomes from a Chinese entity have to pay a withholding tax. According to the notice, the due date for the tax payment has now been moved to the date when the income is actually transferred (Art. 7 Para. 2).


If the income is transferred in several installments, the withholding tax will be calculated once the last installment has been paid. The date of the last payment will then be considered as the due date for the withholding tax (Art. 7 Para. 3).


If the income is fixed in a currency other than RMB, the average exchange rate on the day the payment was carried out will serve as a basis for the calculation of the withholding tax.


The notice also stipulates that the withholding agent has to pay the tax within 7 days after the date when the transaction took place (Art. 7 Para. 1).


Although most of the provisions will only enter into force on 1 December 2017, the changes with regard to dividend payments will be valid immediately and are thus in effect since 17 October 2017!

Other changes


Other changes include a better coordination between different tax bureaus and an easier procedure for withholding agents, which are not registered in the same location as the source of the income. Additionally, tax obligations for shareholders and share transactions are clarified. Finally, with the notice, several previous administrative requirements will be canceled after 1 December 2017. These are:


  1. Contract Filing by the Withholding Agent
  2. Tax Liquidation Procedure
  3. Registration Form of withholding enterprise income tax contract

ECOVIS Beijing’s Take


For foreign businesses, these changes are good news for two reasons.


First, the shift of the due date to the moment of the actual payment reduces the risks of late payment fees and other sanctions. Previously, the due date was the date the shareholder resolution was made. Since the actual transaction takes usually place at a much later point in time and due to the lengthy tax procedure, the withholding tax was thus paid with a considerable delay. As a result, many foreign companies and their withholding agents faced serious fines and administrative sanctions. This problem has now been solved by aligning the date with the actual payment.


Second, the notice also clarifies the provisions of some double tax agreements. For example, the new Sino-German Double Tax Agreement, which went into effect on 1 January 2017, was rather ambiguous on the exact due date for taxes on dividend and capital gains, because the English and German version differed from the Chinese version (For more information on the discrepancies in the Sino-German DTA, read our analysis). With this new notice, Chinese tax authorities have now removed this uncertainty.


ECOVIS Beijing is a Sino-German Consultancy focused on accounting, audit, tax, and legal advisory. If you have any questions regarding our accounting and tax services, please contact


 Elizabeth 150x225  

Elizabeth Shi

Elizabeth Shi is a Senior Tax Manager at Ecovis Beijing. She has over 10 years of working experience in China´s legal, tax and business field. Prior to joining Ecovis, Elizabeth has worked in the Big Four accounting firms’ tax and business advisory departments. She has advised companies on various China tax and legal related matters, including dealing with tax and other government authorities. Her expertise covers tax compliance, restructuring, M&A, tax due diligence, liquidation and deregistration related tax matters as well as tax planning for companies and individual expatriates. Elizabeth started her professional career as a legal consultant in a prestigious IP firm, working on foreign direct investment (FDI) and intellectual property (IP) projects. With her legal background both in academics and in practice, she has a profound understanding of China’s tax system and its operation. For further information please


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