Mr. Lin, who works in the tech industry in Shenzhen, opened a U.S. stock trading account with a friend in early 2026. After six months, his account showed a paper profit of nearly 200,000. Just as he was about to cash out, he suddenly had second thoughts: Does he need to report this money on his tax return in China? If he doesn’t report it, will he get audited?

Until 2026, many people will still be able to gloss over this issue. However, once the full exchange of CRS cross-border information officially takes effect in 2026, data on overseas accounts and investment returns will be synchronized with mainland tax and foreign exchange control systems, making it impossible to gloss over the issue any longer.

Today, we’ll explain once and for all how profits from U.S. stocks are taxed in mainland China—what needs to be reported, what’s exempt, and how to minimize your tax burden.

01

Capital gains and dividends are two different things

Let’s break it down: The money you earn from U.S. stocks falls into two categories, each with completely different tax treatments.

The first type isBid-Ask Spread—that is, capital gains earned by buying low and selling high. Under current mainland individual income tax regulations, capital gains from the trading of foreign stocks by individuals are currently notNot hereWithin the scope of personal income tax in mainland China, this is temporarily exempt from personal income tax.

The second type isDividends. Cash dividends paid to you by a U.S. company are considered part of your worldwide income, and Mainland China tax residents are required to voluntarily report and pay personal income tax on them.

Quick Notes:You don't need to report the profit from the price difference for now, but you must report the dividends.Many people confuse the two, which either leads to unnecessary panic or results in underreporting of dividends, creating potential risks.

02

Three Compliance Red Lines You Must Not Cross

The regulatory standards for 2026 are very clear, and there are several red lines that must not be crossed.

First.Don't use your annual $50,000 foreign exchange quota to transfer funds to overseas brokerage firms. Do not list "securities investment" as the purpose of purchasing foreign currency, as the system is highly likely to flag this, and it may also trigger a warning regarding your personal foreign exchange quota.

Second.Don't Use Relatives' Accounts to Split Up and Exchange Currency. CRS can now identify the actual controllers of accounts, and the information is ultimately aggregated under the name of the beneficial owner—there’s no way to hide it.

Third.All dividend income from U.S. stocks must be voluntarily reported during the annual tax filing period.. Records of failure to file accurately will be added to the individual’s tax credit file, which may affect credit and travel abroad.

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03

ITIN Plus W-8BEN: Dividend Tax Reduced by 20%

There’s a hidden pitfall with U.S. stock dividends: The U.S. government first withholds a 30% dividend tax. However, there is a tax treaty between China and the U.S., under which the dividend tax rate is 10%.

To take advantage of the 10%, you must first prove that you are a Chinese tax resident—Form W-8BENThat's what this is for, and the ITIN is a required field on the form.

ITIN Application Process: Prepare your passport → Fill out Form W-7 → Submit a federal tax return or a statement of reason for the application → Mail or submit in person to the IRS. As of 2026, the IRS processing time is approximately 7 to 11 weeks.

Once you receive your ITIN, update the W-8BEN form in your brokerage account’s online portal, and the dividend tax rate will drop from 30% to 10%. For accounts that receive dividends over the long term, this difference is quite significant.

04

What Are the Tax Differences Between Hong Kong and U.S. Stocks?

Many people switch back and forth between the Hong Kong and U.S. stock markets and are aware that the treatment differs between the two.

As for Hong Kong stocks, dividends and capital gains are currently exempt from personal income tax, resulting in a lower overall tax burden—which is why many people choose to start with a Hong Kong bank account and Hong Kong stocks.

As for U.S. stocks, capital gains are also temporarily exempt, butDividends Must Be Reported...and the U.S. source initially withholds 301 TP3T (which is reduced to 101 TP3T only after an ITIN is obtained).

Therefore, a common approach in practice is to first open a Hong Kong bank account to serve as a funding hub, then use that Hong Kong account to deposit funds into a licensed brokerage in Hong Kong or the U.S., and finally use an ITIN to reduce the tax on U.S. stock dividends.

05

A Five-Step Practical Approach

Putting all of the above together, the path to buying U.S. stocks in compliance with regulations becomes clear.

Step 1: Open a Hong Kong bank account—this is the cornerstone of the entire process. Step 2: Open a brokerage account in Hong Kong or the U.S. and deposit funds using your Hong Kong bank account. Step 3: If you wish to trade U.S. stock options, you may open an account with a U.S. brokerage firm. Step 4: Apply for an ITIN and update your W-8BEN form. Step 5: When filing your annual individual income tax return, accurately report any overseas dividends.

By 2026, the CRS had made the notion that ”profits earned abroad are beyond the reach of mainland authorities” a thing of the past. Rather than facing back taxes and penalties after the fact, it’s better to ensure compliance from the very beginning.

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