【致同税务】境外投资者利润再投资税收抵免政策解析

Core Viewpoint - Countries worldwide are implementing measures to attract foreign direct investment (FDI) to boost economic development, with China continuously optimizing its business environment to encourage reinvestment of overseas capital [1] Group 1: Policy Developments - In June 2025, the Ministry of Finance, State Administration of Taxation, and Ministry of Commerce jointly issued the "Announcement on Tax Credit Policy for Foreign Investors Directly Investing with Distributed Profits" (Announcement No. 2 of 2025), effective from January 1, 2025, to December 31, 2028 [2] - The new tax credit mechanism allows foreign investors to receive a 10% tax credit on the amount reinvested from profits distributed by Chinese resident enterprises, applicable to their corporate income tax [2][4] - The 2025 tax credit policy is an upgrade from the previous deferred tax policy, allowing for both deferred tax and current tax credit, thus providing a more direct incentive for reinvestment [6] Group 2: Eligibility Criteria - To qualify for the tax credit, foreign investors must meet five specific conditions, including using actual distributed profits for reinvestment, investing directly in eligible projects, and holding the investment for at least five years [2][4][11] - The investment must be directed towards industries listed in the "Encouraged Foreign Investment Industry Directory," reflecting a shift towards promoting high-tech and advanced manufacturing sectors [9][8] Group 3: Implementation and Practical Considerations - The tax credit can only offset taxes on income derived from the reinvested profits, such as dividends and royalties, and does not apply to capital gains [17] - The policy allows for carryover of unused tax credits to future years, enhancing the financial flexibility for foreign investors [15] - There are practical concerns regarding the calculation of tax credits in cases of early withdrawal of investments and the implications of changes in industry classification on tax credit eligibility [16][17] Group 4: Historical Context and Comparison - The 2018 deferred tax policy allowed foreign investors to defer tax on reinvested profits without a specific expiration date, while the 2025 tax credit policy introduces a defined timeframe for evaluation and adjustment [13][12] - The 2025 policy reflects a tightening of eligibility criteria compared to the 2018 policy, focusing on encouraging investment in priority sectors rather than a broader range of industries [8][9] Group 5: Future Outlook - The introduction of the tax credit policy signals China's commitment to enhancing the attractiveness of its market for foreign investment, particularly in strategic sectors [17] - Companies are encouraged to assess their eligibility and investment strategies in light of the new policy to maximize the benefits of reduced tax burdens and improved capital efficiency [17]