Dividends Tax Exemption for Foreigners
Foreign-invested enterprises are entities established in China in which foreign entities own the whole or part of the equity interest.
Generally, foreign investments in China are carried out through companies established outside China's jurisdiction, and only a residual part of these investments is carried out by foreign individuals.
Despite the lower number and scale of the investments, foreign individuals setting up and running a company in China can enjoy a tax exemption granted by the Circular of the Ministry of Finance and the State Administration of Taxation on Several Policy Issues concerning Individual Income Tax (Caishuizi  No. 20), issued in May 1994 and partially valid nowadays.
According to Art. 2 Par 8 of Caishuizi  No. 20, dividends received by foreign individuals from foreign-invested enterprises in China shall be temporarily exempt from individual income tax.
It shall be noted that the State Council of the PRC issued in 2013 the Circular on Approving and Forwarding the Several Opinions of Several Departments Including the National Development and Reform Commission on Deepening the Reform of Income Distribution System (Guo Fa  No. 6), aimed, among others, to strengthen the collection and the management of the individual income tax and to cancel the preferential tax treatment policies for foreign individuals concerning dividends received from foreign-invested enterprises. However, the provisions of Caishuizi  No. 20 have not been repealed yet.