Core Points - The new tax incentive policy for foreign investors in China offers a 10% tax credit on direct investments made from distributed profits, significantly enhancing previous policies [1][2][3] - The policy aims to encourage sustained foreign investment in China, promoting high-level openness and economic stability [2][3] - The announcement of this policy has generated considerable interest among foreign investors, with many seeking further information [1][2] Tax Incentive Details - The tax credit applies to foreign investors who reinvest profits distributed from Chinese resident enterprises into eligible domestic projects between January 1, 2025, and December 31, 2028 [1][3] - The policy allows for a 10% tax credit on the investment amount, which can be carried forward if the current year's tax liability is insufficient [1][5] - The previous deferred tax policy, which only postponed tax payments, lacked substantial benefits for some foreign investors, making this new policy a more attractive option [6] Conditions for Eligibility - To qualify for the 10% tax credit, foreign investors must meet five specific conditions, including a minimum holding period of five years for the reinvested capital [6] - The reinvestment must be in industries listed in the national encouraged foreign investment directory [6] - The definition of "foreign investors" includes non-resident enterprises that do not have a permanent establishment in China [6] Broader Context of Foreign Investment Policies - The new tax incentive is part of a broader set of measures aimed at stabilizing foreign investment in China, including the "2025 Action Plan for Stabilizing Foreign Investment" [7][8] - The action plan outlines 20 policy measures to enhance investment promotion and expand open sectors, including telecommunications, healthcare, and education [7][8] - Recent data indicates a decline in actual foreign investment in China, with a 27.1% year-on-year decrease reported for 2024 [8]