According to the Notice of the Ministry of Finance of State Taxation Administration of The People's Republic of China on Tax Issues Concerning Open-end Securities Investment Funds (Caishui [2002] 128),

(1). Individual income tax will not be levied on the difference income obtained by individual investors from purchasing and redeeming fund shares for the time being, and will be levied after the difference income from buying and selling stocks is resumed;

(2) Listed companies, bond issuing enterprises and banks will withhold and pay 20% of personal income tax when they pay the above-mentioned stock dividend income, bond interest income and savings deposit interest income to the fund; Individual income tax and enterprise income tax will not be levied on the income obtained by investors (including individual and institutional investors) from fund distribution.

The income distribution forms of this fund are: paying cash and increasing fund share. In the United States, the distribution of funds generally includes cash distribution and automatic reinvestment to buy fund shares. Almost all funds in the United States have automatic reinvestment clauses.

Most automatic reinvestments do not charge any extra fees. Some fund companies also allow investors to reinvest dividends in other funds under their names, thus diversifying risks to a greater extent. Many shareholders of the same fund choose to reinvest their cash distribution in purchasing additional fund shares instead of withdrawing them in cash.

In the procedure of fund income distribution, the distribution instruction is sent by the fund management company to the fund custodian, and the custodian distributes the total amount approved for distribution to the payee of the instruction. The fund income distribution plan shall specify the base date of income distribution, the distributable profit on that day, the object of fund income distribution, the distribution principle, the distribution time, the distribution amount and proportion, the distribution method and the payment method.

The income distribution of open-end funds in China can be handled by fund managers or transfer agents. Fund management companies send payment instructions to fund custodians, and fund custodians distribute the approved total amount of allocated funds to fund managers or transfer agents. The fund manager or transfer agent decides the amount of dividends that investors deserve and is responsible for paying them to investors.

Baidu Encyclopedia-Fund Income Distribution