图解税收｜一图了解境外投资者以分配利润直接投资税收抵免政策

Core Viewpoint - The article discusses the new tax credit policy for foreign investors in China, aimed at promoting reinvestment of profits earned by foreign enterprises in the country. This policy will be effective from January 1, 2025, to December 31, 2028, and is designed to enhance the business environment and attract foreign investment [1]. Summary by Sections Policy Overview - The policy allows foreign investors to directly invest their distributed profits in China, with tax credits applicable to certain types of income such as dividends and royalties [3][4]. - The applicable tax rate for dividends and similar income under tax treaties with foreign governments is set at below 10% [3]. Eligibility Criteria - Foreign investors must receive profits from Chinese resident enterprises as retained earnings, which can be reinvested [4]. - Direct investments must include capital increases, new establishments, or equity acquisitions, excluding certain stock purchases [4]. - Investments must be in industries listed in the "Encouraged Foreign Investment Industry Catalog" [5]. - Foreign investors are required to hold their investments for at least 5 years (60 months) to qualify for the tax credit [5]. Investment Recovery and Tax Obligations - After 5 years, if foreign investors withdraw their investments, they must report and pay any deferred taxes on the distributed profits [5]. - If investments are withdrawn before the 5-year period, the tax credits will be adjusted, and any excess credits must be repaid [5]. - The policy allows for tax credits to be carried forward until the balance is exhausted, even after the policy's expiration [6]. Application and Compliance - Foreign investors must provide necessary documentation to the profit-distributing enterprises to benefit from the tax credit [6]. - The profit-distributing enterprises can temporarily refrain from withholding taxes on reinvested profits based on the provided documentation [6]. - Investments made before the policy announcement can apply for retroactive tax credits, but investments prior to January 1, 2025, are not eligible [6].