China expands IIT reach on restricted shares and FIE dividends

China has recently made two tax policy adjustments concerning shares held by natural-person shareholders. Under the new rules, the following two situations are now subject to individual income tax (IIT):

  1. Capital gains earned by individuals from transferring bonus shares or converted shares issued after the lock-up period of restricted shares; and
  2. Dividends received by foreign nationals from foreign-invested enterprises (FIEs) in China.