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On 4 January 2011, the Chinese State Administration of Taxation (“SAT”) issued the SAT Announcement 2011 No.2 which provides two lists of old Tax Circulars that were either fully abolished or partially abolished. However, the impacts are only felt recently by the capital market due to the abolishment of the Tax Circular Guoshuifa [1995] No. 45 (“Circular 45”).

Circular 45 provided that foreign individual investors should be exempted from Individual Income Tax ("IIT") in China for dividends received from B-share companies and Chinese companies listed in overseas stock markets.

Starting from 2011, with the abolishment of the Circular 45, many B share companies deduct 10% IIT from the dividends paid to foreign individual investors.