On 1 SEPTEMBER 2026 Chinese authorities have issued a Circular repealing the over 30 years old “temporary exemption” from individual income tax granted to foreigners on dividends and bonus income.

With a sudden notice published yesterday 1 September 2026, the Ministry of Finance (MOF) and State Taxation Administration (SAT) cancelled an over-30-year tax exemption granted to foreign individuals who received dividends from a foreign-invested legal entity. Specifically, the 1994 Notice No. 20 provided for a temporary exemption from individual income tax on dividends and bonus income derived by foreign individuals from foreign-invested enterprises, in order to encourage foreign investments in the Country. This provision has been explicitly repealed by the 1 September Notice No. 27, immediately enforceable.

The rationale of the regulatory change, as stated in the new Notice, is to create a level playing field among domestic and foreign invested companies, avoiding tax loopholes and encouraging other elusive behaviors.

This direction will likely be pursued by the Chinese Tax Administration System also in other areas where foreign individuals have specific advantages, such as the tax-exempt fringe benefits in kind in eight categories of expenses (provided by Cai Shui 2018 N.164 and currently extended until 31 December 2027) where the next step might be their not renewal at expiry.

After nearly 20 years, on January 27, 2026, the EU and India concluded the negotiations over their Free Trade Agreement. This is the largest deal ever for either side, covering a quarter of global GDP and 2 billion people.

India will eliminate duties on 93% of EU exports, while Europe on 91% of India’s exports, saving EU companies €4 billion annually and potentially doubling EU exports to India by 2032.

Key gains

• EU: benefits for agri-food (tariffs on wine and spirits down from 150% to 75%, and then to 40%), automotive parts (duties will gradually fall from 110% to 10%), machinery, chemicals, pharmaceuticals, and medical devices.
• India: improved access for textiles, footwear, pharma, and fisheries.

Thanks to the modern rules of origin and bilateral cumulation, EU firms will be able to build integrated EU-India supply chains while accessing zero tariffs.

India is also opening its services market:

• 100% FDI in insurance and 74% in banking
• A dedicated framework for EU banks to open up to 15 branches over 4 years
• Better access for financial, telecom and maritime services

The FTA provides a crucial framework that transforms India into a potential long-term operating hub in Asia. Its official enforcement is expected for early 2027: it is now in the legal scrubbing phase, EU Parliament consent, and Indian ratification will follow.

On December 12th, 2025, the Council of the EU agreed to accelerate the tightening measures on extra-UE low-value parcels, strategically targeting Chinese e-commerce platforms like Shein and Temu with a fixed €3 customs duty on items valued under €150, set to take effect on July 1st, 2026.

📦 The idea is to stop the growing wave of cheap goods that enter Europe without customs duties, putting local businesses at a disadvantage. However, a recent unilateral action by Italy serves as a warning of potential unintended consequences.

On January 1st, 2026, Italy introduced a €2 tax on parcels valued below €150 arriving from non-EU countries. The result was immediate: e-commerce companies simply rerouted shipments through Poland, Germany, and other EU member states. Hence, Italian logistics hubs might lose substantial revenues, while consumers continue receiving the same products with minimal delay.

⚠️ The Italian experience underscores a critical vulnerability in the EU’s new plan. Without a perfectly synchronized and harmonized enforcement strategy across all 27 member states, the €3 duty risks becoming a mere redirect, rather than a reduction, of the Chinese e-commerce volume. The measure is a first step toward fair competition, but its success depends on unified implementation.

CPO & Partners is delighted to share its active participation in the prestigious European Union Chamber of Commerce in China Site Tour at China Mobile Shanghai Industrial Research Institute and Shanghai Mobile New-Quality Productivity Exhibition Hall.

🚀 This event showcased cutting-edge innovations in 5G, AI, big data, IoT, and new-quality productivity, with demonstrations of Baidou Satellite guidance, drone navigation, and smart transportation.

🎤 Keynotes on cross-border compliance, cloud-network integration, and data pathways by China Mobile experts provided invaluable insights for Sino-European digital collaboration.

🤝 Our presence underscores our commitment to bridging Italy-China business, leveraging nearly 20 years in Shanghai to explore compliant digital infrastructure opportunities for our clients.

Published 9 January 2026, Legislative Decree 30 December 2025, no. 211 enters into force 24 January 2026. Implementing Directive (EU) 2024/1226, the decree transforms administrative violations of EU restrictive measures into criminal offences with direct entity liability under Legislative Decree 231/2001.

• New Criminal Code offences (Articles 275-bis et seq.) target asset freezes, making funds available to designated entities, authorisation breaches, and gross negligence in dual-use classification. Extraterritorial reach covers Italian nationals abroad.
• Entity liability (Article 25-octies.2): 1-5% global turnover sanctions (min. €3-40M), 1-6 year disqualifications. Exemption requires updated 231 Models with CONSIS screening and dual-use protocols.
• Italian groups with China WFOEs, joint ventures and minority stakes: Chinese supply chains circumvent Russia sanctions (19 EU packages). Parent companies risk liability for subsidiary/participated entity violations if exercising direction or deriving benefit.

Actions: CONSIS screening, 231 Model update, training for China operations.

On December 24, 2025, China released the Catalogue of Encouraged Industries for Foreign Investment 2025, effective February 1, 2026, updating the list of sectors and activities eligible for preferential treatment, streamlined procedures, and operational advantages.

Compared to the previous version, the new Catalogue shows a broader scope – with 200+ new items and 300+ revisions – and a more targeted focus on:

• Advanced manufacturing, with items from terminal products and components to raw materials;
• Green technologies and modern services, such as lifestyle, consumer-facing, and digitalized service industries;
• Additional incentives for central, western, northeastern regions (underdeveloped areas), and Hainan.

Four preferential policies:

1. Customs duty exemptions for imported self-use equipment;
2. Preferential industrial land access – reductions down to 70% and more flexibility;
3. Reduced CIT (15%) for eligible projects located in western China and Hainan;
4. Tax credits for profits reinvestment into National Catalogue’s projects.

This update confirms China’s intention to attract foreign investment, especially when aligned with its high-quality growth, innovation, and regional development goals, offering a key instrument for recalibrating China and Far East investment strategies.

Pdf Source (Chinese language)

https://www.ndrc.gov.cn/xxgk/zcfb/fzggwl/202512/P020251224301773999332.pdf

A new policy notice on government procurement introduces a 20% price evaluation advantage for qualifying “Made in China” products – a move designated to strengthen domestic manufacturing while ensuring foreign-invested enterprises (FIEs) can still participate on equal footing.

Key points:

• Domestic products meeting specific transformation and cost criteria can enjoy a 20% bid advantage.
• Mixed procurement packages qualify as “Made in China” if 80% or more of the products are domestically produced.
• Stricter requirements apply to high-tech and security-sensitive components.
• A five-year rollout period followed by a 3-5-year transition ensures smooth implementation.

This policy underscores China’s push for high-quality industrial development, local innovation, and balanced global participation in its procurement ecosystem.

On November 13th, 2025, the European Commission agreed to eliminate the €150 customs duty relief threshold and potentially introduce “handling fees” on e-commerce packages as of 2026.

Given the evolution of the e-commerce model, this exemption is no longer justified and creates unfair competition. This initiative directly addresses the sharp rise in low-value B2C parcels shipped from non-EU platforms to EU consumers.

This measure aligns with the VAT framework already in force since 2021, which abolished the €22 VAT relief threshold, applying VAT on all commercial goods imported into the EU from third countries and requiring an import declaration.

The removal of the customs duty exemption threshold means that all goods, regardless of their value, will no longer be exempt from customs duties – ensuring fairer conditions between wholesale and retail importers.

Until mid-2028, a temporary system will be in place to facilitate duty calculation on low-value parcels; afterwards. the EU Customs Data Hub will centralize the entire customs processing.

This agreement marks a pivotal step in the modernization of EU customs procedures, paving the way for a more streamlined, transparent, and equitable system.

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CBAM – Final Phase: Sustainability as Market-Access Requirement

Starting January 1^st, 2026, the Carbon Border Adjustment Mechanism (CBAM) will enter into full force, introducing a carbon cost on imports with high embedded emissions – including aluminum, cement, electricity, fertilizers, iron and steel – to support more sustainable global trade.

The New Regulation (EU) 2025/2083 launches the definitive phase of CBAM, fully integrating climate policy into international trade.

Importers and their indirect customs representatives will be required to obtain the status of authorized CBAM declarant and operate through the EU’s digital CBAM Registry.

The annual CBAM declaration must be submitted by September 30^th of the year following the imports (first deadline: 2027), while the purchase of CBAM certificates to offset emissions will begin in 2027 for emissions related to 2026.

Updates:

• A de minimis threshold – 50 tons per year for CBAM goods, easing the burden on smaller firms.
• Reduction of the mandatory certificate holding requirement from 80% to 50% of quarterly emissions.
• Possibility for authorized declarants to delegate the CBAM declaration to a third party.

What to do?

• Check whether exempt due to the de minimis
• Apply for CBAM authorization before the end of 2025 (temporary waiver until March 31^st, 2026).
• Set up robust systems for collecting data on embedded emissions in imported goods.

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China postpones the new export controls on Rare Earths announced on October 9th, 2025

After introducing the first export controls on 7 Rare Earths (REEs) and their derivatives on April 4^th, 2025, China announced a second round of restrictions on October 9^th.

The new measures included export controls on an additional 5 REEs as well as a new extraterritorial provision, which – starting from December 1, 2025 – would have required a dual-use item export license issued by MOFCOM even for products manufactured outside China and destined for a third country, if containing raw materials or technologies of Chinese origin. The impact? Potential shipments disruptions, further delays, and significant administrative bottlenecks.

Following preliminary trade talks between Presidents Xi and Trump during the ASEAN Summit on October 30^th, China agreed to suspend the new restrictions for one year. Moreover, during a closed-door meeting between Chinese and EU representatives in Brussels, it was declared – though not yet officially – that the suspension would also apply to the EU.

On November 7^th, 2025, China formally confirmed the suspension of the new REEs export control measures until November 10^th, 2026. However, the controls introduced on April 4^th, 2025, remain in full force.