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Qualified Foreign Institutional Investors ("QFIIs") Subject to Withholding Tax

January 23, 2009

On January 23, 2009, the State Administration of Taxation issued a Circular on Issues Concerning QFIIs' Payment of Withholding Tax on PRC-Sourced Dividend, Profit Distribution and Interest Income (the "Circular"). The Circular clarifies that, according to the new Enterprise Income Tax Law and its Implementation Rules, withholding tax shall be levied at a rate of 10 percent on QFIIs' PRC-sourced dividend and interest income upon payment or accrual of interest by a PRC-resident enterprise. Certain eligible QFIIs may apply to the PRC tax authority for preferential treatment as provided in relevant tax treaties, which preferential treatment may include tax refunds. The Circular changes the previous rules, which did not require QFIIs to pay any PRC tax.

 

Copyright ©2009 by Kaye Scholer LLP. All Rights Reserved. This publication is intended as a general guide only. It does not contain a general legal analysis or constitute an opinion of Kaye Scholer LLP or any member of the firm on the legal issues described. It is recommended that readers not rely on this general guide but that professional advice be sought in connection with individual matters. References herein to "Kaye Scholer LLP & Affiliates," "Kaye Scholer," "Kaye Scholer LLP," "the firm" and terms of similar import refer to Kaye Scholer LLP and its affiliates operating in various jurisdictions.

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