China 2025–2028 Tax Credit Policy for Foreign Investors’ Reinvestment of Profits

On 27 June 2025, China’s Ministry of Finance, State Taxation Administration, and Ministry of Commerce jointly issued Announcement [2025] No. 2, regarding a 10% enterprise income tax credit that can be claimed by eligible foreign investors who reinvest profits (e.g., dividends, interest, royalties or other kind of income) in specified sectors. The policy applies from 1 January 2025 to 31 December 2028, with retroactive eligibility for qualifying investments made after 1 January 2025.

To qualify, reinvestments must be in industries listed in the Encouraged Industries Catalogue and take the form of capital increases, new enterprises, or equity acquisitions from unrelated, non-listed parties. Among those Encouraged Industries are agriculture, mining, manufacturing, construction, transport, IT, finance, R&D and others. The holding period of investment must be at least five years, and investments must be paid directly from the distributing enterprise to the investee. In addition, early withdrawal triggers tax repayment and proportional claw back of tax credits, and compliance is managed through the Ministry of Commerce’s Unified Platform.