Guidance has been issued by several government ministries to encourage overseas investors to expand investments in China.
The Ministry of Finance, State Administration of Taxation, National Development and Reform Commission, and Ministry of Commerce on 28 December 2017 jointly released Caishui  88 (known in English as “notice on the issue that foreign investors' direct investment through distribution of profits will be tentatively exempt from China withholding tax” or Circular 88) and relevant interpretations, which provide foreign investors with a withholding tax deferral incentive for profit reinvestments in China.
Profits derived by a foreign investor from resident companies in China will be entitled to a tax deferral incentive and temporally will not trigger withholding tax, provided that the profits are reinvested in “encouraged projects” and that other conditions are met.
Circular 88 specifies the applicable conditions, procedures and obligations, follow-up administration, departmental coordination mechanism, tax treatment for investment withdrawals, and period of execution regarding to this preferential tax policy.
Read a December 2017 report prepared by the KPMG member firm in China
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