Laws of the People's Republic of China

Ministry of Finance, State Administration of Taxation

Supplementary Notice of the Ministry of Finance and the State Administration of Taxation on the Policy Relating to the Individual Income Taxes on Dividends and Bonuses

Cai Shui [2005] No. 107

The departments (bureaus) of public finance, bureaus of state taxation and local taxation of all provinces, autonomous regions, municipalities directly under the Central Government and the cities under separate state planning and the public finance bureau of the Xinjiang Production and Construction Corps:

For the purpose of further regulating the taxation policies of dividends and bonuses, and reinforcing tax revenue collection and management, the implementation requirement on the exemption or reduction policies of individual income taxes concerning dividends and bonuses is hereby notified as follows:

1.

For any income from dividend and bonuses as actually allotted by a listed company after the day of document Cai Shui [2005] No. 102 is distributed (including the very day of distribution), the reduction policies of individual income taxes shall be implemented according to the provisions of document Cai Shui [2005] No. 102.

Those listed companies, which meet the aforesaid provisions and have paid individual income taxes in light of the full amount of dividends and bonuses, may refund the excessive taxes as collected to individual investors according to the tax-reduction policies as prescribed by document Cai Shui [2005] No. 102; where the tax amount has been turned in to the state treasury, it shall be refunded according to the prescribed procedure by the taxation and public finance departments and shall be returned to individual investors by withholding enterprises.

2.

For the incomes from dividend and bonuses of securities investment funds by allocation of a listed company, the taxable income shall be calculated at a reduced rate of 50% when the withholding agent withholds the individual income taxes according to the provisions of document Cai Shui [2005] No. 102.

3.

The term "listed companies" as mentioned in document Cai Shui [2005] No. 102 refers to the listed companies that are listed for the transaction on the Shanghai Stock Exchange or Shenzhen Stock Exchange

Please implement it accordingly.

Ministry of Finance

State Administration of Taxation

June 24, 2005