Tax treatment related to the listing of enterprises

Chapter 1 Listing Requirements

1. Overview

The mainland capital market consists of two parts: the on-exchange market and the over-the-counter market. Among them, the main board, the small and medium-sized board, the growth enterprise board (commonly known as the second board) of the on-exchange market, the science and technology innovation board and the national small and medium-sized enterprise share transfer system (commonly known as the new third board) in the over-the-counter market, regional equity trading market venues, and local financial asset exchanges together form the multi-level capital market system in the mainland.

Depending on where the stock is listed and the investors it faces, the shares of Chinese listed companies are divided into A-shares, B-shares and H-shares.

2. A shares

The official name of A shares is RMB ordinary shares. It is an ordinary stock issued by a company in mainland China for domestic institutions, organizations, or individuals (excluding Taiwan, Hong Kong and Macao investors) to subscribe and trade in RMB.

(1) Listing conditions for the main board, small and medium-sized board, and GEM

The conditions for the listing of an enterprise are stipulated in accordance with the relevant securities laws and regulations of the People's Republic of China, and the basic conditions are as follows (for details, please refer to the Decision on Amending the Administrative Measures for Initial Public Offerings and Listing of Stocks, Order No. 141 of the China Securities Regulatory Commission, and the Decision on Amending the Administrative Measures for Initial Public Offerings of Shares and Listing on the Growth Enterprise Market (Order No. 123 of the China Securities Regulatory Commission):

(2) Requirements for listing on the STAR Market

On March 1, 2019, the China Securities Regulatory Commission (CSRC) and the Shanghai Stock Exchange (SSE) officially issued the rules and regulations for the early public consultation on the STAR Market, marking the official launch of the STAR Market, and the basic conditions for listing are as follows (for details, please refer to the Administrative Measures for the Registration of Initial Public Offerings of Shares on the STAR Market (for Trial Implementation) Order No. 153 of the China Securities Regulatory Commission, and the Notice on Issuing the Rules for the Listing of Stocks on the SSE STAR Market (SSF [2019] No. 22):

Third, the new third board

The new third board is the third national securities trading venue after the Shanghai and Shenzhen stock exchanges, the full name is the national small and medium-sized enterprise share transfer system, the exchange is located in Beijing, mainly for innovative, growing small and medium-sized enterprises, the listing conditions are as follows (for details, please refer to the announcement on revising the "National Small and Medium-sized Enterprises Share Transfer System Stock Listing Conditions Application Basic Standards Guidelines" Share Transfer System Announcement [2017] No. 366):

4. H shares

H-shares, also known as state-owned enterprise shares, refer to foreign shares registered in the mainland and listed in Hong Kong. (Because of the initials of Hong Kong English - HongKong, it is called H shares.) H shares are physical stocks, and the "T+0" delivery system is implemented, with no limit on the rise and fall. Only institutional investors in Chinese mainland can invest in H-shares, and individual investors in mainland China cannot directly invest in H-shares at present.

Companies are listed on the Hong Kong Stock Exchange, and there are two markets to choose from, the Main Board and the Growth Enterprise Market (GEM), depending on the size and profitability of the company. The Hong Kong Stock Exchange requires companies applying for listing on the Main Board to pass the "Profit Test", "Market Capitalisation/Revenue/Cash Flow Test" or "Market Capitalisation/Earnings Test" as set out in the Rules Governing the Listing of Securities on The Stock Exchange of Hong Kong Limited.

Chapter II: Compilation of Policies

1. Enterprise restructuring

(1) Overview

Enterprise restructuring refers to transactions in which the legal structure or economic structure of an enterprise changes significantly outside of its daily business activities, including changes in the legal form of an enterprise, debt restructuring, equity acquisition, asset acquisition, merger, division, etc.

1. The change of the legal form of an enterprise refers to a simple change in the registered name, domicile and organizational form of the enterprise, except for other types of reorganization that meet the requirements of this Notice.

2. Debt restructuring refers to the matter in which the creditor makes concessions on the debtor's debts in accordance with the written agreement or court ruling reached between the debtor and the debtor in the event of financial difficulties.

There are four main ways to restructure debt:

(1) Settle debts with assets

(2) Conversion of debt into capital

(3) Modify other debt conditions

(4) Combined form

3. Equity acquisition refers to a transaction in which an enterprise (hereinafter referred to as the acquiring enterprise) purchases the equity of another enterprise (hereinafter referred to as the acquired enterprise) in order to realize the control of the acquired enterprise. The form of consideration paid by the acquiring enterprise may include equity payment, non-equity payment, or a combination of both.

4. Asset acquisition refers to a transaction in which one enterprise (hereinafter referred to as the transferee) purchases the substantive operating assets of another enterprise (hereinafter referred to as the transferor). The form of consideration paid by the transferee enterprise includes equity payment, non-equity payment or a combination of the two.

5. Merger refers to the transfer of all assets and liabilities of one or more enterprises (hereinafter referred to as the merged enterprise) to another existing or newly established enterprise (hereinafter referred to as the merged enterprise), and the shareholders of the merged enterprise exchange the equity or non-equity payment of the merged enterprise to achieve the legal merger of two or more enterprises.

6. Separation refers to the separation and transfer of part or all of the assets of an enterprise (hereinafter referred to as the divided enterprise) to an existing or newly established enterprise (hereinafter referred to as the divided enterprise), and the shareholders of the divided enterprise exchange the equity or non-equity payment of the divided enterprise to realize the legal division of the enterprise.

(2) Policy basis

Corporate income tax

1. 《《Cai Shui [2009] No. 59)

2. Announcement No. 4 [2010] of the State Administration of Taxation (Part of the Clauses Expires)

3. (Announcement No. 19 [2010] of the State Administration of Taxation)

4. 《《Guo Shui Han [2010] No. 79)

5. 《《 (CS [2014] No. 109)

6. 《《Cai Shui [2014] No. 116)

7. Announcement No. 29 [2014] of the State Administration of Taxation)

8. Announcement No. 40 [2015] of the State Administration of Taxation)

9. Announcement No. 33 [2015] of the State Administration of Taxation)

10. (Announcement No. 48 [2015] of the State Administration of Taxation)

At present, the corporate income tax policy documents involving restructuring can be divided into the following three categories:

(1) The restructuring policies led by the Finance and Taxation [2009] No. 59 document include: , , and;

(2) The main policies for the transfer of equity or assets include: Article 1 and Article 2, Article 3 of the document and;

(3) The main policies for investment in non-monetary assets include: and.

Therefore, when applying the restructuring policy, it is necessary to analyze the nature of its own economic behavior, choose the appropriate tax policy, and note that according to Article 3 of the Announcement No. 33 of the State Administration of Taxation [2015], an enterprise can only choose one of the three for special tax treatment, and cannot apply these three types of policies at the same time, and once selected, it cannot be changed.

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1. (Announcement No. 13 [2011] of the State Administration of Taxation)

2. (Announcement No. 66 [2013] of the State Administration of Taxation)

3. Annex II of the Cai Shui [2016] No. 36 "Provisions on Matters Concerning the Pilot Program of Replacing Business Tax with Value-Added Tax"

Land Appreciation Tax

1. 《《Cai Shui [2015] No. 5)

2. 《《Cai Shui [2018] No. 57)

Taxes

1. 《《Cai Shui [2015] No. 37)

2. (CS [2018] No. 17)

Personal income tax

1. (Guo Shui Fa [2000] No. 60)

2. 《Cai Shui [2005] No. 103)

stamp duty

(CS [2003] No. 183)

(3) Tax treatment

Corporate income tax

1. General tax treatment

(1) Change of enterprise form

If an enterprise is transformed from a legal person into an unincorporated organization such as a sole proprietorship enterprise or a partnership, or if its place of registration is transferred outside the territory of the People's Republic of China (including Hong Kong, Macao and Taiwan), it shall be regarded as the liquidation and distribution of the enterprise, and the shareholders shall reinvest in the establishment of a new enterprise. The tax basis of all assets of the enterprise and the investments of shareholders should be determined on the basis of fair value.

Unless otherwise specified, the relevant enterprise income tax matters (including loss carry-forward, tax incentives and other rights and obligations) shall be inherited by the enterprise after the change, except for those who do not meet the conditions for tax incentives due to the change of domicile.

(2) Debt restructuring

(1) The use of non-monetary assets to settle debts shall be decomposed into two businesses: transferring relevant non-monetary assets and repaying debts at the fair value of non-monetary assets, and recognizing the income or loss of relevant assets;

(2) In the event of a debt-to-equity swap, it shall be decomposed into two businesses: debt repayment and equity investment, and the income or loss from debt repayment shall be recognized;

(3) The debtor shall recognize the income from debt restructuring according to the difference between the amount of debt paid and the tax basis of the debt; The creditor shall recognize the loss of debt restructuring according to the difference between the debt repayment amount received and the tax basis of the creditor's right;

(4) In principle, the relevant income tax matters of the debtor remain unchanged.

(3) Equity acquisition, asset acquisition and reorganization

(1) The acquiree shall recognize the gains or losses from the transfer of equity and assets;

(2) the tax calculation of equity or assets acquired by the acquirer shall be determined on the basis of fair value;

(3) In principle, the relevant income tax matters of the acquired enterprise remain unchanged.

(4) Business combinations

The parties shall proceed in accordance with the following provisions:

(1) The amalgamating enterprise shall determine the tax basis of the assets and liabilities of the merged enterprise at fair value;

(2) The merged enterprise and its shareholders shall be subject to income tax treatment according to liquidation;

(3) The losses of the merged enterprise shall not be carried forward to make up for in the merged enterprise.

(5) Separation of enterprises

The parties shall proceed in accordance with the following provisions:

(1) The enterprise to be spun off shall recognize the income or loss from the transfer of assets at fair value for the assets to be spun off;

(2) The tax basis of the accepted assets shall be recognized at fair value by the spin-off enterprise;

(3) When the spun off enterprise continues to exist, the consideration obtained by its shareholders shall be treated as a distribution by the spun off enterprise;

(4) When the spun off enterprise no longer exists, the spun off enterprise and its shareholders shall be subject to income tax treatment according to liquidation;

(5) The losses of the enterprises related to the division of the enterprise shall not be carried forward to make up for each other.

2. Special tax treatment

(1) If the following conditions are met at the same time for enterprise reorganization, the special tax treatment provisions shall apply:

(1) It has a reasonable commercial purpose and does not have the main purpose of reducing, exempting or deferring the payment of taxes;

(2) the proportion of assets or equity of the acquired, merged or divided part conforms to the proportion specified in this notice;

(3) The original substantive business activities of the restructured assets shall not be changed within 12 consecutive months after the reorganization of the enterprise;

(4) The amount of equity payment involved in the consideration of the restructuring transaction conforms to the proportion specified in this notice;

(5) The original major shareholders who have obtained equity payments in the reorganization of the enterprise shall not transfer the equity obtained within 12 consecutive months after the reorganization.

If the reorganization of an enterprise meets the above conditions, the parties to the transaction may carry out special tax treatment for the equity payment part of the transaction.

(2) Debt restructuring

The taxable income recognized by the debt restructuring of the enterprise accounts for more than 50% of the taxable income of the enterprise in the current year, and can be evenly included in the taxable income of each year within the period of five tax years.

In the event of a debt-to-equity swap business, the income or loss from debt repayment and equity investment shall not be recognized for the time being, and the tax basis of equity investment shall be determined on the basis of the original creditor's rights. Other relevant income tax matters of the enterprise remain unchanged.

In the event of a debt restructuring as stipulated above, an enterprise shall accurately record the income from debt restructuring that should be recognized, and explain the amount recognized in the current year and the amount carried forward in the year when the enterprise income tax is settled in the corresponding year.

(3) Equity acquisition

If the equity purchased by the acquiring enterprise is not less than 50% of the total equity of the acquired enterprise, and the amount of equity payment by the acquiring enterprise at the time of the equity acquisition is not less than 85% of its total transaction payment, it may choose to be treated according to the following provisions:

(1) The tax basis of the equity of the acquired enterprise obtained by the shareholders of the acquired enterprise shall be determined by the original tax basis of the acquired equity;

(2) The tax basis of the equity of the acquired enterprise shall be determined by the original tax basis of the acquired equity;

(3) The tax basis and other relevant income tax items of the original assets and liabilities of the acquiring enterprise and the acquired enterprise remain unchanged.

(4) Asset acquisition

If the assets acquired by the transferee enterprise are not less than 50% of all the assets of the transferee enterprise, and the equity payment amount of the transferee enterprise at the time of the asset acquisition is not less than 85% of the total transaction payment, it may choose to be handled in accordance with the following provisions:

(1) The tax basis of the equity of the transferee enterprise shall be determined by the original tax basis of the transferred assets;

(2) The tax basis of the assets of the transferred enterprise obtained by the transferee enterprise shall be determined by the original tax basis of the transferred assets.

(5) Business combinations

Shareholders of an enterprise may elect to be treated as follows if the amount of equity payments received at the time of the business combination is not less than 85% of the total amount of their transaction payments, and the business combination under the same control and not requiring the payment of consideration may be treated as follows:

(1) The tax basis of the assets and liabilities of the merged enterprise shall be determined by the original tax basis of the merged enterprise;

(2) The relevant income tax matters of the merged enterprise before the merger shall be inherited by the merged enterprise;

(3) The limit of the losses of the merged enterprise that can be covered by the merged enterprise = the fair value of the net assets of the merged enterprise × the interest rate of the treasury bonds with the longest maturity issued by the state as of the end of the year in which the consolidated business occurs;

(4) The tax basis of the equity of the merged enterprise acquired by the shareholders of the merged enterprise shall be determined by the tax basis of the equity of the merged enterprise originally held.

(6) Separation of enterprises

All shareholders of the divided enterprise acquire the equity of the divided enterprise according to the original shareholding ratio, and neither the divided enterprise nor the divided enterprise change the original substantive business activities, and the equity payment amount obtained by the shareholders of the divided enterprise at the time of the division of the enterprise shall not be less than 85% of the total transaction payment, and they may choose to deal with it according to the following provisions:

(1) The tax basis of the assets and liabilities of the divided enterprise shall be determined by the original tax basis of the divided enterprise;

(2) The income tax items corresponding to the assets of the spun off enterprise shall be inherited by the spun off enterprise;

(3) The amount of losses of the spun off enterprise that has not exceeded the statutory compensation period may be distributed according to the proportion of the spun off assets to all assets, and the separating enterprise shall continue to make up for it;

(4) If a shareholder of the spin-off enterprise obtains the equity of the spin-off enterprise (hereinafter referred to as the "new shares"), if it is necessary to partially or partially give up the equity of the spin-off enterprise (hereinafter referred to as the "old shares"), the tax basis of the "new shares" shall be determined by the tax basis of the renunciation of the "old shares", and if there is no need to give up the "old shares", the tax basis of the "new shares" obtained by the shareholder can be determined from the following two methods: the tax basis of the "new shares" shall be determined as zero directly; Alternatively, the tax basis of the "old shares" originally held by the divided enterprise shall be adjusted according to the proportion of the net assets spun off by the spun off enterprise to the total net assets of the spun off enterprise, and then the reduced tax basis shall be evenly distributed to the "new shares".

(7) Profit or loss of non-equity payment

If the parties to a restructuring transaction do not recognize the income or loss from the transfer of the relevant assets for the equity payment in the transaction, their non-equity payment shall still recognize the corresponding income or loss from the transfer of assets in the current period of the transaction, and adjust the tax basis of the corresponding assets.

Income or loss from asset transfer corresponding to non-equity payment = (fair value of transferred assets - tax basis of transferred assets) × (amount of non-equity payment ÷ fair value of transferred assets)

3. Inheritance of preferential tax treatment for merger and division

(1) Merger

(1) General reorganization

The first paragraph of Article 9 of the document stipulates that: "In the merger by absorption, if the nature of the surviving enterprise and the applicable preferential tax conditions have not changed, it can continue to enjoy the tax incentives for the remaining period of the enterprise before the merger, and the preferential amount shall be calculated according to the taxable income (loss is calculated as zero) of the surviving enterprise in the year before the merger." ”

Article 15 stipulates: "In the event of a merger or division of an enterprise, if the merging parties or the divided enterprise involve the preferential tax treatment for the enterprise as a whole (i.e., all production and operation income) as stipulated in Article 57 of the Tax Law, it shall only be implemented in accordance with the provisions of Article 9 of the Circular for the tax incentives enjoyed by the surviving enterprises; The tax incentives that have not been fully enjoyed by the merged or divided enterprises that have been cancelled shall no longer be inherited by the surviving enterprises; A newly established enterprise established by merger or division shall not inherit or re-enjoy the above preferential treatment. The succession of preferential tax treatment enjoyed by the enterprises in accordance with the preferential tax provisions of the Tax Law and the preferential tax transition policies shall be implemented in accordance with Article 89 of the Regulations for the Implementation of the Enterprise Income Tax Law. ”

(2) Special reorganization

Article 28 provides: "...... With regard to the succession of preferential tax policies, if the transitional policy of preferential tax treatment for the whole enterprise (i.e., all production and operation income) is enjoyed in accordance with Article 57 of the Tax Law, and the nature of the enterprise and the applicable preferential tax conditions have not changed, the enterprise may continue to enjoy the preferential tax treatment for the remaining period of each enterprise before the merger or the enterprise that was divided before the division. If the remaining preferential tax years of each enterprise before the merger are inconsistent, the annual taxable income of the merged enterprise shall be divided according to the proportion of the assets of the enterprise before the merger to the total assets of the merged enterprise on the date of merger, and then the tax payable shall be calculated according to the corresponding remaining preferential treatment. The preferential tax treatment of the income from production and operation projects enjoyed by each enterprise before the merger or the enterprise that was divided before the division in accordance with the preferential tax provisions of the Tax Law and the preferential tax transition policy shall be implemented in accordance with Article 89 of the Regulations on the Implementation of Enterprise Income Tax. ”

(2) Separation

(1) General reorganization

The second paragraph of Article 9 of the document stipulates: "In the division of the existence of the enterprise, if the nature of the surviving enterprise after the division and the conditions for the application of tax incentives have not changed, it can continue to enjoy the tax incentives for the remaining period of the enterprise before the division, and the preferential amount shall be calculated according to the taxable income of the enterprise in the year before the division (the loss is calculated as zero) multiplied by the proportion of the assets of the surviving enterprise after the division to the total assets of the enterprise before the division." ”

(2) Special reorganization

See article 28 above.

4. Transfer of assets and equity

(1) Government allocation

According to Article 1 of the Announcement No. 29 of 2014 of the State Administration of Taxation:

"(1) The people's governments at or above the county level (including the relevant government departments, the same below) shall invest state-owned assets in enterprises in the form of equity investment, and the enterprises shall be treated as state capital (including capital reserves). If the asset is a non-monetary asset, the tax basis shall be determined according to the value received by the government;

(2) The people's government at or above the county level shall transfer state-owned assets to enterprises free of charge, and if they are designated for special purposes and managed in accordance with the provisions of the "Cai Shui [2011] No. 70), the enterprise may be treated as non-taxable income for enterprise income tax. Among them, if the asset is a non-monetary asset, the non-taxable income shall be calculated according to the received value determined by the government.

If the people's government at or above the county level transfers state-owned assets to an enterprise free of charge, and falls under the circumstances other than those mentioned in (1) and (2) above, it shall include the received value determined by the government in the total income of the current period to calculate and pay enterprise income tax. If the government does not determine the receiving value, the taxable income shall be determined based on the calculation of the fair value of the assets. ”

(2) Shareholder allocation

According to the provisions of Article 2 of the Announcement No. 29 of the State Administration of Taxation in 2014: "(1) If an enterprise receives assets transferred by shareholders (including assets donated by shareholders, assets donated by shareholders of listed companies in the process of equity division reform, and shareholders give up their equity of the enterprise, the same below), if the contract or agreement stipulates that it is used as capital (including capital reserve) and has been actually treated in accounting, it shall not be included in the total income of the enterprise. The enterprise should determine the tax basis of the asset at fair value. (2) If an enterprise receives assets transferred by shareholders and treats them as income, it shall be included in the total income at fair value, calculate and pay enterprise income tax, and determine the tax basis of the assets at fair value. ”

(3) Transfers between affiliated enterprises

According to the provisions of the "(CS [2014] No. 109): "3. On the transfer of equity and assets

(1) Where equity or assets are transferred at the net book value between resident enterprises under direct control of 100% or between resident enterprises directly controlled by the same or multiple resident enterprises, where there is a reasonable commercial purpose, the main purpose is not to reduce, exempt or postpone the payment of taxes, and the original substantive business activities of the transferred equity or assets are not changed within 12 consecutive months after the transfer of equity or assets, and neither the transferor nor the transferee enterprise has recognized profit or loss in accounting, You can choose to apply special tax treatment as follows:

1. Neither the transferor nor the transferee enterprise recognizes the income.

2. The tax basis of the transferred equity or assets obtained by the transferee enterprise shall be determined by the original net book value of the transferred equity or assets.

3. The transferred assets obtained by the transferee enterprise shall be depreciated according to its original net book value. ”

According to the provisions of the Announcement No. 40 of 2015 of the State Administration of Taxation:

"1. The term "transfer of equity or assets on the basis of net book value" mentioned in Article 3 of the Circular is limited to the following circumstances:

(1) Between a parent and subsidiary with 100% direct control, the parent company transfers the equity or assets held by the parent company to the subsidiary according to the net book value, and the parent company obtains 100% of the equity payment of the subsidiary. The parent company shall be treated as an increase in long-term equity investment, and the subsidiary shall be treated as an investment received (including capital reserve, the same below). The tax basis of the parent company's acquisition of equity in the subsidiary is determined by the original tax basis of the transferred equity or assets.

(2) Between a parent and subsidiary with 100% direct control, the parent company transfers the equity or assets held by the parent company to the subsidiary at the net book value, and the parent company does not receive any equity or non-equity payment. The parent company shall be treated as the write-off of paid-in capital (including capital reserve, the same below), and the subsidiary shall be treated as an investment received.

(3) Between a parent and subsidiary with 100% direct control, the subsidiary transfers the equity or assets held by the parent company to the parent company according to the net book value, and the subsidiary does not receive any equity or non-equity payment. The parent company shall be treated as a recovered investment, or as an investment received, and the subsidiary shall be treated as a write-off of paid-in capital. The parent company shall reduce the tax basis of the equity of the subsidiary according to the original tax basis of the transferred equity or assets.

(4) Between subsidiaries under 100% direct control of the same or identical parent companies, under the leadership of the parent company, one subsidiary transfers its equity or assets to another subsidiary at the net book value, and the transferor does not receive any equity or non-equity payment. The transferor shall be treated as a write-off of the owner's equity, and the transferee shall be treated as an investment acceptance.

2. Article 3 of the "Notice" refers to "the equity or assets shall not be changed and transferred within 12 consecutive months after the transfer."

"Original substantive business activities of equity or assets" refers to the original substantive business activities of the transferred equity or assets that have not been changed for 12 consecutive months from the date of completion of the transfer of equity or assets.

The date on which the equity or asset transfer is completed refers to the date on which the equity or asset transfer contract (agreement) or approval takes effect and the parties to the transaction have been accounted for.

3. For the transfer of equity or assets subject to special tax treatment in accordance with Article 3 of the Notice, the parties to the transaction shall, on the basis of consensus, adopt the principle of consistent treatment to carry out the special tax treatment in a unified manner.

4. Both parties to the transaction shall submit a written statement to the competent tax authority in the annual declaration of enterprise income tax in the following year after the completion of the transfer of equity or assets, so as to prove that the transferred equity or assets have not changed their original substantive business activities within 12 consecutive months after the completion of the transfer.

5. If a party to a transaction changes its production and operation business, company nature, assets or equity structure within 12 consecutive months after the completion of the transfer of equity or assets, resulting in the transfer of equity or assets no longer meeting the conditions for special tax treatment, the party to the transaction shall report its competent tax within 30 days of the change of circumstances

at the same time, notify the other party in writing. The other party shall report the change to its competent tax authority within 30 days of receiving the notification.

6. Within 60 days after the change of the circumstances mentioned in Article 7 of this announcement, the original parties to the transaction shall carry out tax treatment in accordance with the following provisions:

(1) If it falls under the circumstances specified in Item (1) of Article 1 of this announcement, the parent company shall treat the equity or assets as a sale at the fair value at the time of completion of the original transfer, and recognize the tax basis of the long-term equity investment at the fair value; Subsidiaries are recognized as the tax basis for equity or assets at fair value.

If it falls under the circumstances specified in Article 1 (2) of this announcement, the parent company shall treat it as a sale at the fair value of the equity or assets at the time of completion of the original transfer; Subsidiaries are recognized as the tax basis for equity or assets at fair value.

Under the circumstances specified in Item (3) of Article 1 of this announcement, the subsidiary shall be treated as a sale at the fair value of the equity or assets at the time of completion of the original transfer; The parent company should be treated as a withdrawal or reduction of the investment.

If it falls under the circumstances specified in Item (4) of Article 1 of this announcement, the transferor shall treat it as a sale according to the fair value of the equity or assets at the time of completion of the original transfer; According to the transaction circumstances and accounting treatment, the parent company treats the transferor as a dividend repayment, or as a withdrawal or reduction of investment, and treats the transferee as an investment at the fair value of equity or assets; The transferee is treated as an investment from the parent company, and the tax basis of the equity or asset is recognized at fair value.

(2) The parties to the transaction shall adjust the taxable income and the tax basis of the corresponding equity or assets for the tax year in which the transfer has been completed, apply to the respective competent tax authorities for adjustment of the annual return of enterprise income tax for the tax year in which the transfer has been completed, and calculate and pay the enterprise income tax in accordance with the law. ”

5. Investment in non-monetary assets

According to the provisions of the "Cai Shui [2014] No. 116):

"1. The income from the transfer of non-monetary assets recognized by a resident enterprise (hereinafter referred to as an enterprise) from foreign investment in non-monetary assets may be evenly included in the taxable income of the corresponding year in installments within a period of no more than 5 years, and the enterprise income tax shall be calculated and paid in accordance with the regulations.

2. If an enterprise invests in foreign assets with non-monetary assets, it shall evaluate the non-monetary assets and calculate and recognize the income from the transfer of non-monetary assets according to the balance of the fair value after deducting the tax basis after the assessment.

If an enterprise invests abroad with non-monetary assets, it shall recognize the realization of income from the transfer of non-monetary assets when the investment agreement takes effect and the equity registration formalities are completed.

3. If an enterprise acquires the equity of the invested enterprise through foreign investment in non-monetary assets, the original taxable cost of the non-monetary assets shall be used as the tax basis, plus the income from the transfer of non-monetary assets recognized every year, and adjusted year by year. The tax basis of the non-monetary assets acquired by the invested enterprise shall be determined according to the fair value of the non-monetary assets.

4. If an enterprise transfers the above-mentioned equity or recovers the investment within 5 years of its foreign investment, it shall stop implementing the deferred tax policy, and calculate and pay the enterprise income tax at one time when the annual final settlement of the enterprise income tax in the year of the transfer of equity or investment recovery for the income from the transfer of non-monetary assets that has not been recognized during the deferred period; When calculating the income from equity transfer, an enterprise may adjust the tax basis of equity in place at one time in accordance with the provisions of Paragraph 1 of Article 3 of this Circular. If an enterprise deregisters its outbound investment within 5 years, it shall cease to implement the deferred tax policy, and calculate and pay the enterprise income tax at one time when the annual final settlement of the enterprise income tax in the year of cancellation is made for the income from the transfer of non-monetary assets that have not been recognized during the deferred period.

5. The term "non-monetary assets" mentioned in this circular refers to assets other than monetary assets such as cash, bank deposits, accounts receivable, notes receivable, and bond investments that are ready to be held to maturity.

The term "investment in non-monetary assets" in this notice is limited to the establishment of new resident enterprises with non-monetary assets, or the injection of non-monetary assets into existing resident enterprises. ”

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1. In the process of asset restructuring, if the taxpayer transfers all or part of the physical assets and the related creditor's rights and liabilities through merger, division, sale, replacement, etc., and the final transferee and the labor receiver are the same unit and individual, the relevant provisions of the "Announcement No. 13 [2011] of the State Administration of Taxation are still applicable, and VAT is not levied on multiple transfers of goods.

2. In the process of asset restructuring, all or part of the physical assets and the related creditor's rights, liabilities and labor are transferred to other units and individuals through merger, division, sale, replacement, etc., and the transfer of real estate and land use rights involved is a non-VAT item.

Land Appreciation Tax

According to the "Cai Shui [2018] No. 57) (the implementation period of the following policies is from January 1, 2018 to December 31, 2020. Provisions:

"(1) In accordance with the provisions of the Company Law of the People's Republic of China, if an unincorporated enterprise is restructured into a limited liability company or a joint stock limited company, and a limited liability company (company limited by shares) is restructured into a company limited by shares (limited liability company), the transfer or change of state-owned land use rights, above-ground buildings and their attachments (hereinafter referred to as "real estate") to the restructured enterprise before the restructuring shall not be subject to LAT for the time being.

(2) In accordance with the provisions of the law or the contract, if two or more enterprises are merged into one enterprise, and the investment entity of the original enterprise exists, the transfer or change of real estate from the original enterprise to the merged enterprise shall not be subject to LAT for the time being.

(3) In accordance with the provisions of the law or the contract, if the enterprise is divided into two or more enterprises with the same investment entity as the original enterprise, the transfer or change of real estate from the original enterprise to the enterprise after the division shall not be subject to LAT for the time being. That is, the original enterprise and the investment entity of the original enterprise that enjoy the preferential treatment must be the same. However, the establishment of a subsidiary is not a division of the enterprise, and this clause does not apply.

(4) Units and individuals who invest in real estate at the price of real estate during restructuring and reorganization shall not be subject to LAT for the time being if they transfer or change the real estate to the invested enterprise.

(5) The above-mentioned LAT policies related to restructuring and reorganization shall not apply to the situation where either party to the transfer of real estate is a real estate development enterprise. As long as one party in the restructuring and reorganization is a real estate development enterprise, the restructuring policy does not apply.

(6) When an enterprise transfers the state-owned land use right and declares and pays the LAT after the restructuring and reorganization, the land price paid for obtaining the state-owned land use right before the restructuring and the relevant fees paid in accordance with the unified provisions of the state shall be deducted as the "amount paid by the enterprise for obtaining the land use right".

In the process of restructuring and reorganization, if an enterprise is approved by the land management department at or above the provincial level (including the provincial level), and the state contributes capital to the shares at the price of the state-owned land use right, when the state-owned land use right is transferred and the land appreciation tax is declared and paid, the appraisal price approved by the land management department at or above the provincial level (including the provincial level) at the time of the land purchase shall be deducted as the "amount paid for obtaining the land use right" of the enterprise. When filing tax returns, the enterprise shall provide the approval documents and the approved appraisal price of the land management department at or above the provincial level (including the provincial level) when the land is valued as a shareholder, and shall not be deducted if the approval document and the approved appraisal price cannot be provided.

(7) When applying for the above-mentioned preferential LAT policies, the enterprise shall submit to the in-charge tax authorities the business license, restructuring and reorganization agreement or equivalent documents of both parties to the real estate transfer, the relevant real estate ownership and value certificates, and the voucher (photocopy) of the land premium paid by the transferor for obtaining the land use right before the restructuring and reorganization.

(8) The term "not changing the original investment entity and the same investment entity" as mentioned in this notice means that there is no change in the investor before and after the restructuring and reorganization of the enterprise, and the proportion of the investor's capital contribution may change; The existence of the investor means that the original enterprise investor must exist in the enterprise after the restructuring and reorganization, and the capital contribution ratio of the investor may change. ”

Taxes

According to the provisions of the "Cai Shui [2018] No. 17):

"First, enterprise restructuring

The enterprise shall be restructured as a whole in accordance with the relevant provisions of the Company Law of the People's Republic of China, including the restructuring of an unincorporated enterprise into a limited liability company or a joint stock limited company, the change of a limited liability company into a limited liability company, the change of a limited liability company into a limited liability company, the existence of the original enterprise investment entity and the proportion of equity (shares) held in the restructured (changed) company exceeds 75%, and the company inherits the rights and obligations of the original enterprise after the restructuring (change), the company shall inherit the ownership of the land and houses of the original enterprise after the restructuring (change). Exemption from deed tax.

2. Restructuring of public institutions

If a public institution is restructured into an enterprise in accordance with the relevant provisions of the state, and the original investment entity still exists and the proportion of capital contribution (equity and shares) in the restructured enterprise exceeds 50%, the restructured enterprise shall be exempted from deed tax if it inherits the ownership of the land and housing of the original public institution.

3. Company merger

If two or more companies merge into one company in accordance with the provisions of the law and the contract, and the original investment entity still exists, the deed tax shall be exempted if the merged company inherits the ownership of the land and houses of the original merger parties.

Fourth, the company is divided

In accordance with the provisions of the law and the contract, the company is divided into two or more companies with the same investment entity as the original company, and the company is exempt from deed tax if it inherits the ownership of the land and houses of the original company after the division.

5. Debt-to-equity swap

Enterprises that have been approved by the State Council to implement the debt-to-equity swap shall be exempted from deed tax if the newly established company after the debt-to-equity swap inherits the land and housing ownership of the original enterprise.

6. Allocate land for transfer or capital contribution

If the land allocated by the original restructuring and reorganization enterprise or institution is acquired by way of transfer or state capital contribution (shareholding), it does not fall within the scope of tax exemption stipulated above, and the deed tax shall be levied on the recipient in accordance with the regulations. ”

This notice will be implemented from January 1, 2018 to December 31, 2020. Before the issuance of this Notice, if the deed tax involved in the restructuring and reorganization of enterprises and institutions has not been processed, it may be implemented in accordance with the provisions of this Notice.

Personal income tax

1. According to the provisions of the "Guo Shui Fa [2000] No. 60):

"In order to support the smooth progress of enterprise reorganization and restructuring, there are three ways to deal with the following three situations in the process of quantifying the relevant assets to individual employees when a collective-owned enterprise is restructured into a joint-stock cooperative enterprise:

1. Individual income tax shall not be levied on the quantitative assets of enterprises obtained by individual employees in the form of shares only as the basis for dividends and without ownership.

2. Suspend the collection of individual income tax on the quantitative assets of enterprises with ownership acquired by individual employees in the form of shares; When an individual transfers the shares, the balance of the transfer income after deducting the expenses actually paid by the individual when acquiring the shares and the reasonable transfer expenses shall be levied according to the item of "income from property transfer".

3. Individual income tax shall be levied on the dividends and bonuses obtained by individual employees from participating in the distribution of enterprise quantitative assets obtained in the form of shares. ”

2. According to the provisions of Article 2 of the "Cai Shui [2005] No. 103), "the income paid by shareholders of non-tradable shares to shareholders of tradable shares through consideration shall be temporarily exempted from corporate income tax and individual income tax payable by shareholders of tradable shares in the reform of equity division. ”

stamp duty

1. In accordance with the provisions of the "Cai Shui [2003] No. 183), in order to implement the spirit of the instructions of the State Council on supporting the restructuring of enterprises and standardize the relevant tax policies in the process of enterprise restructuring, the stamp duty policies involved in the process of restructuring of enterprises approved by the people's governments at or above the county level and the competent departments of enterprises are hereby notified as follows:

"I. Stamp duty on the book of funds

(1) For a new enterprise established in the process of restructuring of an enterprise that implements the transformation of the company system (re-registering as a legal person), the funds recorded in the newly opened capital account books or the funds increased due to the establishment of capital ties by the enterprise may no longer be decaled, and the part that has not been decaled and the newly added funds in the future shall be decaled according to the regulations. The transformation of the company system includes the transformation of state-owned enterprises into wholly state-owned limited liability companies in accordance with the Company Law; The enterprise realizes the participation of others in the enterprise through capital increase and share expansion or transfer of part of the property rights, and transforms the enterprise into a limited liability company or a company limited by shares; The enterprise forms a new company with another person with part of its property and corresponding debts; The enterprise leaves its debts in the original business and forms a new company with its prime property with others.

(2) For a new enterprise established by merger or division, the funds recorded in the newly opened capital account book may no longer be decaled, and the part that has not been decaled and the newly added funds in the future shall be decaled in accordance with the regulations. Mergers include mergers by absorption and new mergers. Divisions include existing divisions and new divisions.

(3) The newly increased funds of the enterprise's debt-to-equity swap shall be affixed in accordance with the regulations.

(4) The funds increased by the assessment in the enterprise restructuring shall be appliquéd according to the regulations.

(5) The funds recorded in other accounting subjects of the enterprise shall be converted into paid-in capital or capital reserve funds in accordance with the provisions of the decal.

2. Stamp duty on various types of taxable contracts

For all kinds of taxable contracts signed before the restructuring of the enterprise but not yet completed, if it is necessary to change the enforcement entity after the restructuring, the decals shall not be applied to those who only change the enforcement entity and the other terms have not been changed and have been decaled before the restructuring.

3. Stamp duty on documents for the transfer of property rights

The property right transfer documents signed by the enterprise due to the restructuring are exempt from decals. ”

(4) Risk warning

1. The special reorganization must meet the relevant conditions

For example, the amount of equity payment by the acquiring enterprise at the time of the equity acquisition shall not be less than 85% of the total transaction payment, etc., if the prescribed proportion is not reached, the special restructuring cannot be applied.

2. On debt restructuring

(1) If the non-cash settlement of debts involves impairment provisions, the impairment provisions cannot be deducted before tax and tax adjustments are required.

(2) Income from debt restructuring shall be included in the taxable income in a lump sum if it does not meet the conditions for special restructuring. According to Article 1, "the income from the transfer of property (including various assets, equity, creditor's rights, etc.) acquired by an enterprise, the income from debt restructuring, and the income from receiving donations cannot be repaid."

Unless otherwise specified, the income payable shall be included in the annual calculation and payment of enterprise income tax in a lump sum, regardless of whether it is reflected in monetary or non-monetary form. ”

3. The special tax treatment of corporate restructuring is not a tax incentive

The special tax treatment of corporate restructuring is not a tax preference, but is intended to maintain tax neutrality. The restructuring event is not exempted due to special tax treatment, but may only be partially deferred from the tax year to which the reorganization date belongs to the following tax year (mainly involving the tax liability of the debtor of debt restructuring and the tax liability of investors investing in non-monetary assets), or the tax liability may be deferred from the restructuring stage to the next transaction link, and transferred from one legal entity to another legal entity (mainly involving equity acquisition, asset acquisition, business combination, and enterprise division).

4. Cross-year tax treatment of corporate restructuring matters

If an enterprise conducts a step-by-step transaction of its assets and equity within 12 consecutive months before and after the occurrence of the reorganization, the above-mentioned transaction shall be treated as an enterprise restructuring transaction in accordance with the principle of substance over form.

Article 7 of Announcement No. 48 [2015] of the State Administration of Taxation stipulates that if the same restructuring business involves step-by-step transactions within 12 consecutive months and spans two tax years, if the parties expect the entire transaction to meet the conditions for special tax treatment when the transaction is completed in the first tax year, and choose the special tax treatment by consensus, they may temporarily apply the special tax treatment and submit written declaration materials when filing the annual enterprise income tax declaration of the current year.

After all transactions are completed in the next tax year, the enterprise should determine whether to apply special tax treatment. If special tax treatment is applicable, the parties shall declare relevant information in accordance with the requirements of this announcement; If the general tax treatment is applicable, the annual return of enterprise income tax for the corresponding tax year shall be adjusted to calculate and pay the enterprise income tax.

5. Follow-up management of special tax treatment of enterprise restructuring

Each party to the restructuring should establish a special file for the restructuring matters and keep them properly by a designated person to reduce the tax risk when disposing of the restructured assets in the future.

6. The transfer of assets (equity) must meet the relevant conditions

The application of special restructuring to the transfer of assets (equity) between enterprises must meet the conditions stipulated in the policy, such as the transfer of equity or assets within 12 consecutive months after the transfer of equity or assets, the original substantive business activities of the transferred equity or assets, if changed, the special restructuring cannot be applied.

7. Do not change the original substantive business activities of the restructured assets within 12 months

Regardless of special restructuring or asset (equity) transfer, it is required that the original substantive business activities of the restructured assets shall not be changed within 12 consecutive months after the reorganization, and the original substantive business activities of the transferred equity or assets shall not be changed within 12 consecutive months after the transfer of equity or assets. Therefore, if there is a change within 12 months of the reorganization or transfer, the special reorganization cannot be applied.

2. Equity transfer

(1) Overview

Equity transfer is a civil legal act in which a shareholder of a company transfers his or her shareholder rights and interests to others for compensation in accordance with the law, so that others can obtain equity and inherit the company's rights and interests. Equity transfer is divided into direct transfer and indirect transfer. Direct transfer refers to the direct transfer of the transferee's own equity to the transferee; Indirect transfer refers to the transfer of the transferor and equity in a way that does not involve the agreement of the parties, including inheritance, company merger, etc.

(2) Policy basis

Corporate income tax

1. Equity transfer between resident enterprises

(1) (Decree No. 512 of the State Council of the People's Republic of China)

(2) Announcement No. 6 [2010] of the State Administration of Taxation)

(3) (Announcement No. 19 [2010] of the State Administration of Taxation)

(4) 《 (Guo Shui Han [2010] No. 79)

2. Transfer of non-resident equity

(1) 《 (CS [2009] No. 59)

(2) Announcement No. 24 [2011] of the State Administration of Taxation (invalid in some provisions)

(3) (Announcement No. 72 [2013] of the State Administration of Taxation)

(4) Announcement No. 7 [2015] of the State Administration of Taxation (some provisions are invalid)

(5) Announcement No. 37 [2017] of the State Administration of Taxation)

Personal income tax

1. 《Cai Shui Zi [1998] No. 61)

2. 《《 (CS [2014] No. 81)

3. (SAT Announcement [2014] No. 67)

4. 《《 Cai Shui [2015] No. 125)

5. 《Cai Shui [2016] No. 127)

6. 《 (CS [2017] No. 78)

7. 《Cai Shui [2018] No. 137)

8. 《《Cai Shui [2018] No. 154)

vat

(CS [2016] No. 36)

stamp duty

(Decree No. 11 of the State Council)

Taxes

(CS [2018] No. 17)

(3) Tax treatment

Corporate income tax

1. Equity transfer between resident enterprises (1) Recognition of income from equity transfer

Article 3 of the "Guo Shui Han [2010] No. 79) stipulates that the income from the transfer of equity of an enterprise shall be recognized when the transfer agreement takes effect and the procedures for equity change are completed. The income from the transfer of equity is the income from the transfer of equity after deducting the costs incurred in acquiring the equity. When calculating the income from equity transfer, the enterprise shall not deduct the amount that may be distributed according to the equity in the undistributed profits and other retained earnings of the shareholders of the invested enterprise.

(2) One-time recognition of profit or loss

The income and losses incurred by the enterprise shall be recognized and deducted at one time.

Article 1 of the Announcement No. 19 of 2010 of the State Administration of Taxation stipulates that: "Income from the transfer of property (including various assets, equity, creditor's rights, etc.), income from debt restructuring, income from receiving donations, and income from payables that cannot be repaid, whether in monetary or non-monetary form, shall be included in the annual calculation and payment of enterprise income tax in a lump sum, unless otherwise specified." ”

Article 1 of the Announcement No. 6 of 2010 of the State Administration of Taxation stipulates that "the losses incurred by enterprises in their external equity (hereinafter referred to as equity) investments shall be deducted as enterprise losses in a lump sum when calculating the taxable income of enterprises in the year in which the losses are recognized." ”

(3) Cost recognition

Article 71 of the Decree No. 512 of the State Council of the People's Republic of China stipulates that "the investment assets mentioned in Article 14 of the Enterprise Income Tax Law refer to the assets formed by the equity investment and creditor's right investment made by the enterprise abroad. When an enterprise transfers or disposes of investment assets, the cost of investment assets is allowed to be deducted. The cost of investment assets shall be determined in accordance with the following methods: (1) investment assets acquired by way of cash payment, with the purchase price as the cost; (2) Investment assets acquired by means other than cash payment shall be costed at the fair value of the assets and the relevant taxes and fees paid. ”

2. Transfer of equity by non-residents (direct equity transfer) (1) General provisions

The income from equity transfer here refers to the income obtained by a non-resident enterprise from the transfer of the equity of a Chinese resident enterprise (excluding the purchase and sale of shares of a Chinese resident enterprise in the open securities market). For example, if a foreign company A invests in the establishment of company A in China, and now company A transfers the equity of company A to company B (which may be a resident enterprise or a non-resident enterprise), in this case, it is a non-resident and directly transfers the equity in China, and the Announcement No. 37 [2017] of the State Administration of Taxation applies.

(1) The income from the transfer of property as stipulated in Paragraph 2 of Article 19 of the Enterprise Income Tax Law includes the income from the transfer of equity investment assets such as equity (hereinafter referred to as "equity"). The balance of the income from equity transfer after deducting the net equity value is the taxable income from equity transfer.

Income from equity transfer refers to the consideration received by the equity transferor for the transfer of equity, including various incomes in monetary and non-monetary forms.

The net equity value refers to the tax basis on which the equity is acquired. The tax basis of equity is the cost of capital contribution actually paid by the equity transferor to the Chinese resident enterprise when investing in the shares, or the actual cost of equity transfer paid to the original transferor of the equity when purchasing the equity. If the equity is impaired or increased during the holding period, and the profit or loss can be recognized in accordance with the provisions of the competent financial and taxation departments of the State Council, the net equity value shall be adjusted accordingly. When calculating the income from equity transfer, the enterprise shall not deduct the amount that may be distributed according to the equity in the undistributed profits and other retained earnings of the shareholders of the invested enterprise.

If the same equity is partially transferred for multiple investments or acquisitions, the cost corresponding to the transferred equity shall be calculated and determined from the total cost of the equity according to the proportion of the transfer.

(2) If the amount paid or due by the withholding agent is paid or denominated in a currency other than RMB, the foreign currency translation shall be carried out according to the following circumstances:

a. If the withholding agent withholds the enterprise income tax, it shall convert the taxable income of the non-resident enterprise into RMB according to the central parity of the RMB exchange rate on the date of the withholding obligation. The date on which the withholding obligation arises is the date on which the relevant amount is actually paid or due for payment.

b. If a non-resident enterprise that obtains income declares and pays withholding tax at source before being ordered to pay tax by the in-charge tax authority within the time limit, it shall convert it into RMB according to the central parity of the RMB exchange rate on the day before the date of filling out the tax payment form, and calculate the taxable income of the non-resident enterprise.

c. If the in-charge taxation authority orders a non-resident enterprise that obtains income to pay withholding tax at source within a time limit, it shall convert the taxable income of the non-resident enterprise into RMB according to the central parity of the RMB exchange rate on the day before the date on which the in-charge tax authority makes the decision to pay tax within the time limit.

(3) If the income from the transfer of property or the net value of the property is denominated in a currency other than RMB, the amount of non-RMB denominated items shall be converted into RMB in accordance with Article 4 of this Announcement. The taxable income from the transfer of property of non-resident enterprises shall be calculated in accordance with Paragraph 2 of Article 19 of the Enterprise Income Tax Law and relevant provisions.

The net value of property or income from the transfer of property is denominated in the currency in which the property is actually paid or received at the time of acquisition or transfer. If the original denominated currency ceases to be in circulation and the new currency is activated, it will be calculated after it is converted to the new currency according to the conversion ratio between the old and new currency markets.

(4) When a withholding agent signs a business contract with a non-resident enterprise related to the income specified in Paragraph 3 of Article 3 of the Enterprise Income Tax Law, if the contract stipulates that the withholding agent shall actually bear the tax payable, the non-tax income obtained by the non-resident enterprise shall be converted into tax-included income to calculate and pay the withholding tax.

(5) The withholding agent shall declare and settle the withholding tax to the competent tax authority where the withholding agent is located within 7 days from the date of occurrence of the withholding obligation. In the event that the withholding agent fails to pay when due, it shall carry out tax treatment in accordance with Article 1 of the Announcement No. 24 of 2011 of the State Administration of Taxation.

If a non-resident enterprise obtains income from the same transfer of property for which income tax should be withheld at source by way of instalment collection, the amount received in installments may first be regarded as recovering the cost of the previous investment property, and then calculate and withhold the tax withholding after the cost has been fully recovered.

(2) Special restructuring provisions

1. According to Article 5 of the "Cai Shui [2009] No. 59):

"5. Where the following conditions are met at the same time for the reorganization of an enterprise, the provisions on special tax treatment shall apply:

(1) It has a reasonable commercial purpose, and does not have the main purpose of reducing, exempting or deferring the payment of taxes.

(2) The proportion of assets or equity of the acquired, merged or divided part conforms to the proportion specified in this notice.

(3) The original substantive business activities of the restructured assets shall not be changed within 12 consecutive months after the reorganization of the enterprise.

(4) The amount of equity payment involved in the consideration of the restructuring transaction shall comply with the proportion specified in this notice.

(5) The original major shareholders who have obtained equity payments in the reorganization of the enterprise shall not transfer the equity obtained within 12 consecutive months after the reorganization. ”

2. According to Article 7 of the "Cai Shui [2009] No. 59):

"VII. In the event of an equity and asset acquisition transaction involving between China and overseas China (including Hong Kong, Macao and Taiwan), in addition to meeting the conditions stipulated in Article 5 of this Circular, an enterprise shall also meet the following conditions before it can choose to apply the special tax treatment provisions:

(1) The transfer of the equity of the resident enterprise owned by the non-resident enterprise to another non-resident enterprise in which it is 100% directly controlled does not cause any change in the withholding tax burden on the income from the equity transfer in the future, and the non-resident enterprise of the transferor undertakes in writing to the competent tax authority not to transfer the equity of the non-resident enterprise owned by the transferee within 3 years (including 3 years);

(2) A non-resident enterprise transfers the equity of another resident enterprise owned by it to a resident enterprise in which it has a direct controlling relationship of 100%;

(3) Resident enterprises invest in non-resident enterprises in which they are directly controlled by 100% of their assets or equity;

(4) Other circumstances approved by the Ministry of Finance and the State Administration of Taxation. ”

3. Article 8 of the "Cai Shui [2009] No. 59) stipulates that:

"8. If a resident enterprise referred to in Item (3) of Article 7 of this Circular invests in a non-resident enterprise with its assets or equity that it has a direct controlling relationship of, if the income from the transfer of assets or equity chooses special tax treatment, it may be evenly included in the taxable income of each year within 10 tax years."

4. The Announcement No. 72 [2013] of the State Administration of Taxation stipulates that:

"In order to standardize and strengthen the administration of the application of special tax treatment to the equity transfer of non-resident enterprises, in accordance with the relevant provisions of the "Enterprise Income Tax Law of the People's Republic of China" and its implementation regulations, (CS [2009] No. 59, hereinafter referred to as the "Notice"), the relevant issues are hereby announced as follows:

1. The equity transfer referred to in this announcement refers to the circumstances specified in Article 7 (1) and (2) of non-resident enterprises; Among them, the circumstances specified in Article 7(1) of the Circular include the transfer of the equity of a Chinese resident enterprise due to the division or merger of an overseas enterprise.

2. If a non-resident enterprise chooses special tax treatment for equity transfer, it shall file within 30 days after the equity transfer contract or agreement takes effect and the industrial and commercial change registration formalities are completed. If it falls under the circumstances of Item (1) of Article 7 of the Notice, the transferor shall file with the competent tax authority for income tax at the place where the transferred enterprise is located; If it falls under the circumstances of Item (2) of Article 7 of the Notice, the transferee shall file with the competent tax authority for income tax in the place where it is located.

The equity transferor or transferee may entrust an agent to handle the filing matters; When the agent handles the filing matters on his behalf, he or she shall issue a written power of attorney from the filing person to the in-charge tax authorities.

VII. If the equity transfer of a non-resident enterprise has not been filed for special tax treatment or does not meet the requirements after investigation and verification, the general tax treatment provisions shall apply, and the enterprise income tax shall be paid in accordance with the relevant provisions.

8. If the equity transfer of a non-resident enterprise falls under the circumstances of Item (1) of Article 7 of the Circular and chooses special tax treatment, and the transferor and the transferee are not in the same country or region, if the undistributed profits before the equity transfer of the transferred enterprise are distributed to the transferee after the transfer, it shall not enjoy the preferential treatment of dividend tax reduction under the tax treaty (including tax arrangement) signed between the country (region) where the transferee is located and China, and the transferee shall withhold and pay the enterprise income tax in accordance with the relevant provisions of the tax law. Go to the local income tax authority to declare and pay. ”

3. Non-resident equity transfer (indirect equity transfer)

Indirect transfer of Chinese taxable assets refers to transactions in which a non-resident enterprise directly or indirectly holds the equity and other similar rights and interests (hereinafter referred to as "equity") of an overseas enterprise (excluding overseas registered Chinese resident enterprises, hereinafter referred to as "overseas enterprises") that directly or indirectly holds Chinese taxable assets, resulting in the same or similar substantive result as the direct transfer of Chinese taxable assets, including the change of shareholders of the overseas enterprise caused by the restructuring of the non-resident enterprise. A non-resident enterprise that indirectly transfers taxable property in China is called the equity transferor. For example, if a foreign company A invests in the establishment of company A in China, and now company B, a shareholder of company A, transfers the equity of company A to a non-resident enterprise company C, although the shareholder of company A is still company A, but company B indirectly transfers the equity in China, this situation is an indirect equity transfer, and the announcement on several issues concerning the enterprise income tax on the indirect transfer of property by non-resident enterprises (Announcement No. 7 of 2015 of the State Administration of Taxation) applies:

"1. Where a non-resident enterprise indirectly transfers the equity and other property of a Chinese resident enterprise through the implementation of an arrangement that does not have a reasonable commercial purpose, thereby evading the enterprise income tax liability, the indirect transfer transaction shall be recharacterized in accordance with the provisions of Article 47 of the Enterprise Income Tax Law and recognized as a direct transfer of the equity and other property of the Chinese resident enterprise."

(1) Determine whether the reasonable business purpose standard applies

"3. To determine the reasonable commercial purpose, all arrangements related to the indirect transfer of Chinese taxable property should be considered as a whole, and the following relevant factors should be comprehensively analyzed in light of the actual situation:

(1) Whether the main value of the equity of the overseas enterprise is directly or indirectly derived from the taxable assets of China;

(2) Whether the assets of the overseas enterprise are mainly composed of direct or indirect investments in China, or whether the income obtained by the overseas enterprise is mainly directly or indirectly derived from the territory of China;

(3) whether the functions actually performed by the overseas enterprise and its subsidiaries directly or indirectly holding Chinese taxable assets and the risks assumed can prove that the enterprise structure has economic substance;

(4) the duration of the overseas enterprise's shareholders, business model, and relevant organizational structure;

(5) Income tax payable abroad for indirect transfer of Chinese taxable property;

(6) the substitutability of indirect investment and indirect transfer of Chinese taxable property transactions and direct investment and direct transfer of Chinese taxable property transactions by the equity transferor;

(7) the tax treaties or arrangements applicable in China for income from indirect transfer of Chinese taxable property;

(8) Other relevant factors. ”

(2) "Blacklist" criteria

"4. In addition to the circumstances specified in Articles 5 and 6 of this Announcement, if the overall arrangement related to the indirect transfer of Chinese taxable property meets the following conditions at the same time, it is not necessary to analyze and judge in accordance with Article 3 of this Announcement, and shall be directly determined that it does not have a reasonable commercial purpose:

(1) More than 75% of the value of the equity of the overseas enterprise comes directly or indirectly from the taxable assets of China;

(2) At any point in time within one year prior to the indirect transfer of Chinese taxable property, more than 90% of the total assets (excluding cash) of the overseas enterprise are directly or indirectly constituted by investment in China, or more than 90% of the income obtained by the overseas enterprise is directly or indirectly sourced from within China within one year before the indirect transfer of Chinese taxable property;

(3) Overseas enterprises and subsidiaries that directly or indirectly hold Chinese taxable assets are located in the country where they are located

(regional) registration to meet the organizational requirements of the law, but the functions actually performed and the risks assumed are limited and insufficient to prove that they have economic substance;

(4) The income tax payable abroad for indirect transfer of Chinese taxable property is lower than the possible tax burden in China for direct transfer of Chinese taxable property. ”

(3) "Whitelist" criteria

According to Articles 5 and 6 of the "Announcement No. 7 [2015] of the State Administration of Taxation, these situations include "safe harbor for listed companies", "safe harbor for tax treaties" and "safe harbor for group restructuring".

Safe Harbor for Listed Companies: Non-resident enterprises obtain income from indirect transfer of Chinese taxable assets by buying and selling shares of the same listed overseas enterprise in the open market.

Tax treaty safe harbor: In the case of a non-resident enterprise directly holding and transferring taxable property in China, the income from the transfer of such property is exempt from corporate income tax in China in accordance with the provisions of the applicable tax treaty or arrangement.

Group Restructuring Safe Harbor: "6. If the indirect transfer of Chinese taxable property meets the following conditions at the same time, it shall be deemed to have a reasonable commercial purpose:

(1) The equity relationship between the parties to the transaction falls under any of the following circumstances:

1. The equity transferor directly or indirectly owns more than 80% of the equity of the equity transferee;

2. The equity transferee directly or indirectly owns more than 80% of the equity of the equity transferor;

3. The equity transferor and the equity transferee are directly or indirectly owned by the same party with more than 80% of the equity.

If more than 50% (excluding 50%) of the equity of the overseas enterprise comes directly or indirectly from real estate in China, the target shareholding ratio in these three cases shall be 100%. The equity indirectly owned above is calculated by multiplying the shareholding ratio of each enterprise in the shareholding chain.

(2) The Chinese income tax burden of indirect transfer transactions that may occur again after this indirect transfer transaction will not be reduced compared with the same or similar indirect transfer transactions that do not occur in the absence of this indirect transfer transaction.

(3) The equity transferee shall pay the equity transaction consideration in the equity of the enterprise or the enterprise with which it has a controlling relationship (excluding the equity of the listed enterprise). ”

4. Definition of tax liability time

If the income from the indirect transfer of immovable property or the income from the indirect transfer of equity shall be subject to enterprise income tax in accordance with the provisions of this announcement, the unit or individual that directly bears the obligation to pay the relevant amount to the equity transferor in accordance with the relevant laws and regulations or the contract shall be the withholding agent.

The date on which the tax liability arises refers to the date on which the equity transfer contract or agreement takes effect and the overseas enterprise completes the equity change. If the income from the indirect transfer of the property of an institution or place is subject to enterprise income tax in accordance with the provisions of Announcement No. 7, it shall be included in the income of the institution or place in the tax year to which the tax liability occurs, and the enterprise income tax shall be declared and paid in accordance with the relevant regulations.

If the withholding agent fails to withhold or fails to withhold the tax payable in full, the equity transferor shall declare and pay the tax to the in-charge tax authority within 7 days from the date of occurrence of the tax liability, and provide relevant information for calculating the income and tax of the equity transfer. The in-charge taxation authorities shall report to the State Administration of Taxation for the record within 30 days after the tax is deposited.

If the withholding agent fails to withhold and the equity transferor fails to pay the tax payable, the in-charge tax authorities may pursue the liability of the withholding agent in accordance with the relevant provisions of the Tax Administration Law and its implementation rules; However, if the withholding agent has submitted the materials in accordance with Article 9 of Announcement No. 7 within 30 days from the date of signing the equity transfer contract or agreement, the liability may be reduced or exempted.

Personal income tax

1. Except for the transfer of shares of listed companies obtained from the public offering and transfer markets of listed companies on the Shanghai Stock Exchange and Shenzhen Stock Exchange, the transfer of restricted shares, and other equity transfers with special provisions (the above equity transfer circumstances are otherwise specified), according to the following provisions:

According to the "Announcement No. 67 of 2014 of the State Administration of Taxation": "Article 3 The equity transfer referred to in these measures refers to the transfer of equity by an individual to another individual or legal person, including the following circumstances:

(i) Sale of shares;

(2) the company's repurchase of shares;

(3) When the issuer makes an initial public offering of new shares, the shareholders of the invested enterprise offer the shares held by them to investors in the form of a public offering;

(4) The equity is forcibly transferred by the judicial or administrative organs;

(5) Investing abroad or conducting other non-monetary transactions with equity;

(6) Repayment of debts with equity;

(7) Other equity transfers. ”

"Article 4 For the transfer of equity by an individual, the balance of the income from equity transfer after deducting the original value of the equity and reasonable expenses shall be the taxable income, and the individual income tax shall be paid according to the "income from property transfer" (tax rate of 20%).

Reasonable expenses refer to the relevant taxes and fees paid in accordance with the regulations when the equity is transferred. ”

"Article 8 All kinds of payments obtained by the transferor in connection with the equity transfer, including liquidated damages, compensation and other items, assets, rights and interests, etc., shall be incorporated into the income from equity transfer."

"Article 9 The subsequent income obtained by the taxpayer after satisfying the agreed conditions in accordance with the contract shall be regarded as the income from equity transfer."

If the declared income from equity transfer is obviously low and there is no justifiable reason, the in-charge tax authorities may verify the income from equity transfer.

"Article 13 If the income from equity transfer is obviously low if one of the following conditions is met, it shall be deemed to have legitimate reasons:

(1) Be able to issue valid documents to prove that the production and operation of the invested enterprise have been significantly affected due to the adjustment of national policies, resulting in the transfer of equity at a low price;

(2) Inheriting or transferring equity to a spouse, parents, children, grandparents, grandchildren, siblings, and a guardian or supporter who bears the obligation of direct support or support to the transferor;

(3) The internal transfer of equity held by the employees of the enterprise that cannot be transferred to the outside world as stipulated by relevant laws, government documents or articles of association, and there are relevant materials that fully prove that the transfer price is reasonable and true;

(4) Other reasonable circumstances in which both parties to the equity transfer can provide effective evidence to prove their reasonableness. “

"Article 15 The original value of the equity transferred by an individual shall be confirmed in accordance with the following methods:

(1) For equity acquired by way of cash contribution, the original value of equity shall be determined according to the sum of the actual price paid and the reasonable taxes and fees directly related to the acquisition of equity;

(2) For equity acquired by way of capital contribution of non-monetary assets, the original value of equity shall be determined according to the sum of reasonable taxes and fees directly related to the price of non-monetary assets and the acquisition of equity at the time of investment and equity acquisition recognized or approved by the tax authorities;

(3) If the equity is acquired by way of free transfer, and the circumstances listed in Item 2 of Article 13 of these Measures are met, the original value of the equity shall be determined according to the sum of the reasonable taxes and fees incurred in the acquisition of the equity and the original value of the equity of the original holder;

(4) If the invested enterprise has converted capital reserves, surplus reserves and undistributed profits into share capital, and the individual shareholders have paid individual income tax in accordance with the law, the original equity value of the newly converted share capital shall be confirmed by the sum of the amount of the conversion and relevant taxes and fees;

(5) In addition to the above circumstances, the in-charge taxation authorities shall reasonably confirm the original value of equity in accordance with the principle of avoiding duplicate collection of individual income tax. ”

2. Transfer of shares of listed companies by individuals

According to the provisions of the "Cai Shui Zi [1998] No. 61), in order to cooperate with the restructuring of enterprises and promote the steady development of the stock market, with the approval of the State Council, from January 1, 1997, the income obtained by individuals from the transfer of shares of listed companies will continue to be temporarily exempted from individual income tax.

3. Individual transfer of shares of companies listed on the National Equities Exchange and Quotations (NEEQ).

According to the provisions of the "Cai Shui [2018] No. 137):

"1. From November 1, 2018 (inclusive), the income obtained by individuals from the transfer of non-original shares of companies listed on the New Third Board shall be temporarily exempted from individual income tax.

The non-original shares mentioned in this notice refer to the shares obtained by individuals after the listing of companies listed on the New Third Board, as well as the gifts and transfers derived from the above-mentioned stocks.

2. The income obtained by individuals from the transfer of the original shares of companies listed on the New Third Board shall be subject to individual income tax at a proportional rate of 20% according to the "income from property transfer".

The original shares mentioned in this notice refer to the shares obtained by individuals before the listing of companies listed on the New Third Board, as well as the gifts and transfers of shares bred by the above-mentioned stocks before and after the listing of the company.

3. Before September 1, 2019, the individual income tax on the transfer of the original shares of the company listed on the New Third Board shall be levied in accordance with the relevant provisions of the current equity transfer income, with the transferee of the stock as the withholding agent, and the tax authority where the invested enterprise is located shall be responsible for the collection and management.

From September 1, 2019 (inclusive), the individual income tax on the transfer of the original shares of a company listed on the New Third Board shall be subject to the securities institution where the stock is deposited as the withholding agent, and the competent tax authority where the securities institution where the stock custody is located shall be responsible for collection and management. The specific collection and management measures shall be implemented with reference to the relevant provisions of the "Cai Shui [2009] No. 167) and the "Cai Shui [2010] No. 70). ”

4. Transfer of shares of overseas listed companies by individuals

According to the provisions of the "Cai Shui [2005] No. 35), the income obtained by an individual from the transfer of shares of an overseas listed company shall be calculated in accordance with the provisions of the tax law and the tax payable, and the tax shall be paid in accordance with the law.

5. Mainland individuals transfer stocks listed on the Hong Kong Stock Exchange through Shanghai-Hong Kong Stock Connect and Shenzhen-Hong Kong Stock Connect

According to the provisions of the "Cai Shui [2016] No. 127) (Cai Shui [2017] No. 78), the income from the transfer of the price difference obtained by mainland individual investors from investing in stocks listed on the Hong Kong Stock Exchange through Shenzhen-Hong Kong Stock Connect will be temporarily exempted from individual income tax from 5 December 2016 to 4 December 2019; Individual income tax will continue to be temporarily exempted from the transfer of income derived from the transfer of shares listed on the Hong Kong Stock Exchange through Shanghai-Hong Kong Stock Connect from 17 November 2017 to 4 December 2019.

vat

1. The transfer of equity of listed companies shall be subject to VAT

According to the provisions of the "Cai Shui [2016] No. 36), the transfer of equity of listed companies by a unit shall be subject to VAT according to the tax item of "financial services - transfer of financial products", and the balance after deducting the purchase price from the selling price shall be the sales amount, and the applicable tax rate shall be 6%, and the collection rate shall be 3% for small-scale taxpayers, and the tax liability shall be on the day of the transfer of ownership of financial products. For the transfer of financial products, no special VAT invoice shall be issued.

The positive and negative difference between the transfer of financial products shall be the balance of the profit and loss as the sales amount. If there is a negative difference after the offset, it can be carried forward to the next tax period to offset the sales of the transferred financial products in the next period, but if there is still a negative difference at the end of the year, it shall not be carried forward to the next fiscal year.

The purchase price of a financial instrument can be calculated according to the weighted average method or the moving weighted average method, and cannot be changed for 36 months after the selection.

In addition, if a non-listed enterprise has not issued shares to the public, its equity is not a security, and the transfer of equity of a non-listed company is not within the scope of value-added tax.

2. The transfer of equity by an individual is exempt from VAT

According to Article 1, Paragraph 22 of Annex III of the "Provisions on the Transitional Policy for the Pilot Program of Replacing Business Tax with Value-Added Tax" (CS [2016] No. 36) clearly states that individuals engaged in the transfer of goods are exempt from VAT. Therefore, the transfer of restricted shares by individuals is exempt from VAT.

stamp duty

According to Article 2 of the State Council promulgated in 1988, the document of property right transfer is a taxable certificate. Property right transfer documents refer to the data established by the sale, inheritance, gift, exchange, and division of the property rights of units and individuals, including the transfer documents of property ownership, copyright, exclusive right to use trademarks, patent rights, and the right to use proprietary technology. The equity transfer contract is a "property right transfer document" referred to in the Regulations, and stamp duty shall be paid according to the law according to the decal of 5/10,000 of the amount contained therein.

1. Taxpayers

The taxpayer is the grantor, i.e. the transferor and the assignee. It is up to both parties to the transaction to self-declare.

2. When the tax liability arises

The taxable voucher shall be affixed at the time of writing or receiving.

Taxes

In the transfer of equity (shares), units and individuals inherit the company's equity (shares), and the ownership of the company's land and houses is not transferred, and no deed tax is levied.

According to Article 1 of the Provisional Regulations on Deed Tax, the units and individuals who transfer the ownership of land and houses are the taxpayers of the deed tax. Equity transfer, the transfer is the equity held by the company's shareholders, the land and house are still in the name of the company, and there has been no change of ownership, so no deed tax is levied.

(4) Risk warning

1. The cost of equity transfer shall be calculated according to the historical cost

It is wrong for an enterprise that adopts the equity method to use the accounting cost as the taxable cost when the equity transfer is transferred, and does not calculate the equity transfer cost according to the historical cost stipulated in the tax law.

2. The equity transfer price should be fair

Abnormal transfers include gratuitous transfers, parity transfers, low-price transfers and other transfers that do not conform to the arm's length principle. First, whether the transferor and the parties are affiliated enterprises, and secondly, whether the transfer price is fair. Article 41 of the Enterprise Income Tax Law stipulates that: "If the business dealings between an enterprise and its related parties do not comply with the arm's length principle and reduce the taxable income or income of the enterprise or its related parties, the tax authorities shall have the right to adjust it in accordance with reasonable methods." Article 110 of the Regulations for the Implementation of the Enterprise Income Tax Law stipulates that "the arm's length principle referred to in Article 41 of the Enterprise Income Tax Law refers to the principle that the parties to a transaction without a related relationship shall conduct business transactions in accordance with the fair transaction price and business practices". The price of equity transfer between affiliated enterprises is unfair and may be adjusted by the tax authorities.

3. Pay attention to indirect equity transfers that do not have a reasonable commercial purpose

Both parties to the indirect equity transfer transaction are overseas, and there is no change in the domestic resident enterprise, so the biggest risk of indirect equity transfer is that it is difficult to detect. Most of the foreign shareholders are shell companies in tax havens, which do not have a reasonable commercial purpose and seem to have nothing to do with the domestic enterprises, but in fact, the value of the equity transfer basically comes from the domestic enterprises, and the withholding enterprise income tax should be paid according to the income from the equity transfer.

3. Lifting of the ban on restricted shares

(1) Overview

At present, the restricted shares in the mainland A-share market are mainly composed of two parts: one is the restricted shares generated by the share reform; The other type is the restricted shares generated by the initial offering and listing (IPO) of new shares. Restricted shares under the share reform refer to the tradable shares with a limited sale period that are converted from the original non-tradable shares in the process of equity division reform, and are commonly known as "large and small non-tradable shares" in the market. In order to maintain the stability of the company's control, the Company Law and the Exchange Listing Rules have certain restrictions on the shares held by shareholders before the public offering of shares (IPO) for companies listed in an initial public offering (IPO). Such restricted shares currently account for the majority of all restricted shares, and more new restricted shares will appear in the future. After the listing of new shares, the transfer shares obtained by the restricted shares of the new shares in the calendar years before the lifting of the restriction also constitute restricted shares.

(2) Policy basis

Corporate income tax

(SAT Announcement [2011] No. 39)

vat

(SAT Announcement [2016] No. 53)

Personal income tax

1. 《《 Cai Shui [2009] No. 167)

2. 《《Cai Shui [2010] No. 70)

3. 《Guo Shui Fa [2010] No. 8)

4. 《》 (Guo Shui Han [2010] No. 23)

5. 《《 Cai Shui [2011] No. 108)

6. Article 4 of the "Cai Shui [2012] No. 85).

(3) Tax treatment

1. Transfer of restricted shares by legal persons

Corporate income tax

(1) Taxation of restricted shares held by enterprises on behalf of individuals

According to the provisions of the Announcement No. 39 [2011] of the State Administration of Taxation, the restricted shares originally contributed by individuals and held by the enterprise on behalf of the enterprise due to the reform of equity division shall be handled by the enterprise in accordance with the following provisions when transferring:

(1) The income obtained by the enterprise from the transfer of the above-mentioned restricted shares shall be calculated and taxed as the taxable income of the enterprise.

The balance of the above-mentioned income from the transfer of restricted shares after deducting the original value of restricted shares and reasonable taxes and fees is the income from the transfer of restricted shares. If the enterprise fails to provide a complete and true certificate of the original value of the restricted shares, and fails to accurately calculate the original value of the restricted shares, the in-charge tax authorities shall verify the original value of the restricted shares and reasonable taxes and fees at the rate of 15% of the income from the transfer of the restricted shares.

No tax shall be paid when the balance of income from the transfer of restricted shares after the tax liability has been completed in accordance with the provisions of this article and is transferred to the actual owner.

(2) In accordance with the judgment or ruling of the court, if the enterprise directly changes the individual restricted shares held on its behalf to the name of the actual owner through the securities depository and clearing company, it shall not be regarded as the transfer of restricted shares.

(2) Taxation of the transfer of restricted shares by enterprises before the lifting of the ban on restricted shares

If an enterprise transfers its restricted shares to another enterprise or individual (hereinafter referred to as the transferee) before the lifting of the ban on restricted shares, the enterprise income tax issues shall be handled in accordance with the following provisions:

(1) The enterprise shall calculate and pay tax according to the total income obtained from the reduction of restricted shares registered with the securities registration and clearing institution, which shall be included in the taxable income of the enterprise in the current year.

(2) If the restricted shares held by the enterprise have been transferred to the transferee by an agreement before the lifting of the ban, but the equity registration has not been changed and is still held by the enterprise, if the income obtained by the enterprise from the actual reduction of the restricted shares is transferred to the transferee in accordance with the provisions of Paragraph 1 of this Article, and the balance is transferred to the transferee, the transferee shall not pay tax.

vat

(1) Confirmation of sales

According to the provisions of the "Cai Shui [2016] No. 36), the transfer of restricted shares by a unit shall be subject to VAT according to the "transfer of financial services - financial products", and the balance after deducting the purchase price from the selling price shall be the sales amount, and the applicable tax rate shall be 6%, and the collection rate shall be 3% for small-scale taxpayers, and the tax liability shall be on the day of the transfer of ownership of financial products. For the transfer of financial products, no special VAT invoice shall be issued.

The positive and negative difference between the transfer of financial products shall be the balance of the profit and loss as the sales amount. If there is a negative difference after the offset, it can be carried forward to the next tax period to offset the sales of the transferred financial products in the next period, but if there is still a negative difference at the end of the year, it shall not be carried forward to the next fiscal year.

(2) Confirmation of the purchase price

The purchase price of a financial instrument can be calculated according to the weighted average method or the moving weighted average method, and cannot be changed for 36 months after the selection.

According to Article 5 of the Announcement No. 53 of the State Administration of Taxation [2016]: "5. If the unit transfers the restricted shares held by it after the ban on circulation is lifted, the purchase price shall be determined in accordance with the following provisions:

(1) When a listed company implements the equity division reform, the original non-tradable shares formed before the resumption of stock trading, as well as the transfer and transfer of shares bred by the above-mentioned shares from the first day of stock resumption to the lifting date of the stock resumption, shall be based on the opening price of the first day of the resumption of trading of the shares after the completion of the equity division reform of the listed company as the purchase price.

(2) The restricted shares formed by the company's initial public offering and listing, as well as the gift and transfer of shares bred by the above-mentioned shares from the first day of listing to the date of lifting the ban, shall be based on the issue price of the initial public offering (IPO) of the listed company's shares as the purchase price.

(3) For the restricted shares formed by the listed company's implementation of major asset restructuring, as well as the transfer or transfer of shares from the above-mentioned shares from the first day of stock resumption to the date of lifting the ban, the closing price of the listed company on the trading day before the suspension of the shares due to the material asset restructuring shall be the purchase price. ”

2. Transfer of restricted shares by natural persons

Personal income tax

(1) Scope of restricted shares

According to the provisions of the "Cai Shui [2009] No. 167) and the "Cai Shui [2010] No. 70), the restricted shares include:

(1) The original non-tradable shares held by shareholders before the resumption date of the stock resumption date after the completion of the equity division reform of the listed company, as well as the gift or transfer of shares bred by the above-mentioned shares during the period from the date of stock resumption to the date of lifting the ban;

(2) the restricted shares formed by the company that made an initial public offering of shares and listed after the separation of the old and the new after the 2006 equity division reform, as well as the gift and transfer of shares derived from the above-mentioned shares from the first day of listing to the date of lifting the ban (hereinafter referred to as "new restricted shares");

(3) Unreleased restricted shares transferred by individuals from institutions or other individuals;

(4) Restricted shares obtained by individuals due to lawful inheritance or division of family property according to law;

(5) Restricted shares held by individuals that have been transferred from the agency share transfer system to the main board market (or the small and medium-sized board and gem market);

(6) In the merger by absorption of the listed company, the shares of the merging company that were converted from the restricted shares of the merged party company originally held by individuals;

(7) In the division of a listed company, the shares of the company after the division that are converted by the restricted shares of the company of the divided company held by individuals;

(8) Other restricted shares jointly determined by the Ministry of Finance, the State Administration of Taxation, the Legislative Affairs Office and the China Securities Regulatory Commission.

(2) Taxable acts of transfer of restricted shares

Article 2 of the "Cai Shui [2010] No. 70) stipulates that:

"According to the provisions of Articles 8 and 10 of the Regulations for the Implementation of the Individual Income Tax Law, individuals who transfer restricted shares or engage in other transactions that have the substance of transferring restricted shares and obtain cash, in-kind, negotiable securities and other forms of economic benefits shall be subject to individual income tax. If the restricted shares are transferred multiple times before the lifting of the ban, the transferor shall pay individual income tax on the income from each transfer in accordance with the regulations. Individual income tax shall be levied in accordance with the provisions under the following circumstances:

(1) Individuals transfer restricted shares through the centralized trading system of the stock exchange or the block trading system;

(2) Individuals subscribing or subscribing for shares of exchange-traded funds (ETFs) with restricted shares;

(3) Accepting a tender offer for an individual with restricted shares;

(4) The individual exercises the cash option to transfer the restricted shares to a third party who provides the cash option;

(5) Transfer of restricted shares by individual agreement;

(6) The restricted shares held by the individual are judicially deducted;

(7) Individuals transfer the ownership of restricted shares due to lawful inheritance or division of family property;

(8) Individuals use restricted shares to repay the consideration paid by major shareholders to shareholders of tradable shares on behalf of them in the reform of equity division of listed companies;

(9) Other circumstances that have the substance of the transfer. ”

(3) Collection and management of the transfer of restricted shares

The individual income tax on the income from the transfer of restricted shares shall be subject to the holder of the restricted shares, and the securities institution with which the individual shareholder opens an account shall be the withholding agent. The individual income tax on restricted shares shall be collected and administered by the competent tax authority where the securities institution is located.

In the event of the occurrence of items (1), (2), (3) and (4) of point 2, the individual income tax payable by the taxpayer shall be levied in accordance with the provisions of the Caishui [2009] No. 167 document, which shall be levied by a combination of withholding and prepayment by securities institutions, self-declaration and liquidation by taxpayers and direct withholding by securities institutions;

If a taxpayer has any of the circumstances in items (5), (6), (7) and (8), the taxpayer shall declare and pay taxes on his own. After the taxpayer transfers the restricted shares, he or she shall report to the in-charge tax authorities within seven days of the following month to fill in the "Restrictions".

Individual income tax liquidation return for income from the sale and transfer of shares", self-declaration and tax payment. After examination and confirmation, the in-charge tax authorities shall issue tax payment vouchers, and taxpayers shall go through the transfer procedures of restricted shares with the tax payment vouchers and a copy of the Individual Income Tax Liquidation Return for Income from the Transfer of Restricted Shares. If the taxpayer fails to provide a copy of the tax payment certificate and the Individual Income Tax Liquidation Return for Income from the Transfer of Restricted Shares, the Securities Depository and Clearing Company shall not handle the transfer.

(4) Calculation of tax payable on restricted shares

(1) Tax rate: Since January 1, 2010, the income obtained from the transfer of restricted shares by individuals shall be subject to individual income tax at a proportional rate of 20% according to the "income from property transfer".

(2) The calculation of tax payable stipulates that the taxable income shall be the income from the transfer of restricted shares by an individual, after deducting the original value of the shares and reasonable taxes and fees. Namely:

Taxable income = income from the transfer of restricted shares - (original value of restricted shares + reasonable taxes) tax payable = taxable income ×20%

If the taxpayer fails to provide a complete and true certificate of the original value of the restricted shares, and fails to accurately calculate the original value of the restricted shares, the in-charge taxation authorities shall verify the original value of the restricted shares and reasonable taxes and fees at 15% of the income from the transfer of the restricted shares.

(3) Confirmation of tax payable: According to the provisions of the "(Guo Shui Fa [2010] No. 8), the restricted shares formed before the completion of the technical and institutional preparations of securities institutions shall be levied in a simple way of "verification (withholding) + liquidation"; The restricted shares formed after the completion of the technical and institutional preparations of the securities institution shall be directly withheld by the securities institution.

Therefore, different collection and management measures are adopted to determine the tax payable for the restricted shares formed before and after the completion of the technical and institutional preparations of securities institutions:

For the restricted shares formed before the completion of the technical and institutional preparations of the securities institution, the securities institution shall calculate the transfer income according to the closing price of the resumption of trading of the restricted shares under the share reform, or the closing price on the first day of listing of the restricted shares of the new shares, and determine the original value of the restricted shares and reasonable taxes and fees according to 15% of the calculated transfer income, and apply the 20% tax rate to calculate the withholding and withholding individual income tax on the balance of the transfer income after deducting the original value and reasonable taxes.

If there is a difference between the tax payable calculated by the taxpayer based on the actual transfer income and the actual cost and the amount of withholding and withholding tax by the securities institution, the taxpayer shall, within 3 months from the first day of the month following the month in which the securities institution withholds and pays the tax, submit a liquidation declaration to the in-charge tax authority and handle the liquidation matters with the transaction records stamped with the seal of the securities institution and relevant complete and authentic certificates. After examination and confirmation, the in-charge tax authorities shall go through the tax refund (supplement) procedures according to the recalculated tax payable. If the taxpayer fails to go through the liquidation matters with the in-charge tax authorities within the prescribed time limit, the tax authorities will no longer handle the liquidation matters, and the withheld and prepaid taxes shall be paid in full from the tax deposit account to the state treasury.

After the completion of the technical and institutional preparation of the securities institution, the restricted shares of the newly listed company shall be subject to a 20% tax rate to calculate the amount of direct withholding individual income tax according to the original value of the cost of the restricted shares implanted in the settlement system in advance by the securities institution and the reasonable taxes and fees incurred, and the balance of the actual transfer income minus the original value and reasonable taxes and fees.

(5) Other documents and policy provisions for the transfer of restricted shares

(1) (Guo Shui Han [2010] No. 23) further refines the specific operating procedures for the collection and settlement of tax deductions on the transfer of restricted shares formed before the completion of the technical and institutional preparations of securities institutions.

(2) (CS [2011] No. 108) further refines the operational provisions on the collection and administration of individual income tax on income from the transfer of restricted shares formed after the completion of the technical and institutional preparations of securities institutions.

vat

According to Article 1, Paragraph 22 of Annex III of the "Provisions on the Transitional Policy for the Pilot Program of Replacing Business Tax with Value-Added Tax" (CS [2016] No. 36) clearly states that individuals engaged in the transfer of goods are exempt from VAT. Therefore, the transfer of restricted shares by individuals is exempt from VAT.

(4) Risk warning

1. Strictly confirm the nominee shareholding

Before the reform of equity division, due to the restrictions of regulatory authorities, some individual investors often purchased non-tradable shares through legal person enterprises, forming the phenomenon of "nominee shareholding". This policy is limited to "restricted shares originally contributed by individuals and held by enterprises on behalf of enterprises due to the reform of equity division", and does not apply to the policy if it is not due to the reasons for the reform of equity division.

2. The tax law only recognizes the transfer of restricted shares in the legal sense

The tax law does not recognize the transaction of restricted shares that have not been legally transferred, but strictly pays taxes in accordance with the legal form. If an enterprise has agreed to transfer the restricted shares held by the enterprise several times before the lifting of the ban on restricted shares, but the shares have not been transferred to the securities registration and clearing institution, the tax law will only recognize the transfer of restricted shares in the legal sense in accordance with the principle of "legal form is more important than economic substance".

(5) Case analysis

Case 1: Taxation of restricted shares held by an enterprise on behalf of an individual

In 2004, Mr. Yang handed over RMB 1 million to Company A, which is a nominee shareholding company, for the purchase of non-tradable shares. Later, through the reform of equity division, it became a restricted share. In 2014, Company A transferred the restricted shares and obtained income of 10 million, but the original value of the restricted shares could not be accurately calculated.

Company A pays enterprise income tax = 1000 * (1-15%) * 25% = 212.5 (10,000 yuan)

Company A delivered the remaining 7.875 million yuan to Mr. Yang, the actual investor, and Mr. Yang received 7.875 million yuan of income with the original 1 million yuan and no longer paid individual income tax.

Case 2: Taxation of the transfer of restricted shares by an enterprise before the lifting of the ban on restricted shares

Company A held 100,000 restricted shares of Company B at a purchase cost of 100,000 yuan, which was transferred to Company C for a price of 1.5 million yuan due to the need for funds, and Company C was transferred to Company D for another 4 million yuan. After the restricted shares were lifted, Company A sold the restricted shares and obtained an income of 6 million yuan.

Company A pays enterprise income tax on the transfer of restricted shares = (600-10) * 25% = 147.5 (10,000 yuan)

When Company A transferred the balance after tax to Company C and Company D, Company C and Company D no longer paid tax because Company A had paid all the taxes on the income of RMB 5.9 million.

Case 3: Taxation of restricted shares of listed companies transferred by individual shareholders

A company was listed on April 25, 2008, and the closing price on the first day of listing was 13.92 yuan; On January 6, 2010, the closing price of a company was $9.68.

1. China Securities Depository and Clearing Corporation calculates the individual income tax payable per share of 13.92× (1-15%)×20%=2.37 yuan, and the approved cost is 13.92×15%=2.1 yuan;

2. Suppose a shareholder of a restricted share of the company reduces his shareholding at the closing price on January 6, and the actual transaction price is lower than the closing price on the first day of listing for the calculation of withholding tax, it should be said that the taxpayer has withheld more tax and the taxpayer should apply for liquidation.

3. In the process of liquidation, in accordance with the principle of matching income and cost, if the taxpayer provides the actual transfer income of 9.68 yuan and the actual original value of the stock and related taxes and fees, the actual tax payable per share shall be calculated as 9.68 yuan minus the actual original value and taxes; If the taxpayer is unable to provide the actual cost information, according to the principle of income and cost matching, the actual tax payable per share shall be 9.68× (1-15%)×20%=1.64 yuan, and the approved cost shall be calculated based on the actual transfer income, that is, 9.68×15%=1.45 yuan. The principle of revenue and cost ratio requires that the calculation basis of income must be consistent with the calculation basis of the original value of cost, and it is not allowed that the transfer income shall be calculated at the lower actual transaction price, and the original value shall be calculated at the higher closing price of 2.1 yuan on the first day.

4. According to the above calculation, assuming that the costs are all approved costs, the taxpayer should be refunded 2.37-1.64=0.73 yuan per share

4. Capital reserve and retained earnings are converted into capital

(1) Overview

There are two main ways for a company to increase its registered capital: one is to absorb new foreign capital, including adding new shareholders or additional investment from the company's original shareholders; The second is to use capital reserves, surplus reserves to increase capital, or undistributed profits to increase capital. Capital reserve refers to the provident fund formed by the enterprise in the course of operation due to the acceptance of donations, share capital premium, and the revaluation and appreciation of statutory property. Surplus reserve refers to the accumulated funds withdrawn from the net profit of the enterprise in accordance with the relevant regulations; Undistributed profit refers to the profit carried forward from the past years after the net profit realized by the enterprise has been retained by the enterprise after making up for the loss, withdrawing the surplus reserve and distributing the profit to investors.

(2) Policy basis

1. Article 26

2. Articles 17, 56 and 83

3. 《《 Guo Shui Fa [1997] No. 198)

4. (Guo Shui Han [1998] No. 289)

5. 《《Guo Shui Fa [2010] No. 54)

6. (Guo Shui Han [2010] No. 79)

7. 《 (CS [2015] No. 116)

(3) Tax treatment

1. Tax treatment of the conversion of capital reserve into capital increase

(1) Treatment of individual income tax

According to the provisions of the "" (Guo Shui Fa [1997] No. 198), the capital reserve formed by the stock premium to increase the capital does not belong to the distribution of dividends and bonuses, and the amount of the converted capital obtained by the individual is not regarded as personal income and is not subject to individual income tax. It should be noted that, according to the provisions of the "Guo Shui Han [1998] No. 289), "the 'capital reserve' mentioned in Guo Shui Fa [1997] No. 198 refers to the capital reserve formed by the premium issuance income of joint-stock enterprises. The amount obtained by individuals from the converted share capital shall not be subject to individual income tax as taxable income. However, the part of personal income allocated by other capital reserves that do not conform to this shall be subject to individual income tax in accordance with the law. Therefore, in addition to the capital reserve formed by the capital (stock) premium of a company limited by shares, and the natural person shareholders do not need to pay individual income tax, other such as the premium of the limited liability company (capital), the transfer of appropriations, the difference in the conversion of foreign currency capital, and the conversion of other capital reserves into capital shall be subject to individual income tax at a rate of 20% according to the item of "interest, dividends, and bonus income". ”

(2) Treatment of enterprise income tax

The capital reserve formed by the capital premium is converted into capital and is exempt from corporate income tax.

According to Article 4 of the "Guo Shui Han [2010] No. 79), "if the invested enterprise converts the capital reserve formed by the equity (ticket) premium into share capital, it shall not be regarded as the dividend and bonus income of the investor enterprise, and the investor enterprise shall not increase the tax basis of the long-term investment". For both investors, there is no issue of corporate income tax payment and withholding. That is, if the capital reserve formed by the capital premium is converted into equity capital, the income is not recognized in the tax revenue, and the enterprise income tax is naturally not paid, and of course, the tax cost of the investor's long-term equity investment cannot be increased.

2. Tax-related treatment of the conversion of retained earnings into increased capital

(1) Treatment of individual income tax

According to the provisions of the "" (Guo Shui Fa [2010] No. 54): "Strengthen the management of the conversion of registered capital and share capital of enterprises, and levy individual income tax in accordance with the current policies and regulations on the conversion of registered capital and share capital with undistributed profits, surplus reserves and other capital reserves other than stock premium issuance." In other words, the regulations only stipulate that enterprises are subject to individual income tax when they convert "other capital reserves other than the issuance of shares at a premium" to increase their registered capital. Therefore, if the shareholder is a natural person, the essence of the retained earnings of the invested enterprise is to distribute first and then invest, and the individual shareholder should pay individual income tax. The tax shall be withheld and paid by the company limited by shares with the approval of the capital increase by the relevant departments and the resolution of the company's shareholders' meeting.

According to the provisions of Article 3 of the "Cai Shui [2015] No. 116): "Regarding the individual income tax policy for enterprises to increase their share capital: 1. Since January 1, 2016, when unlisted small and medium-sized high-tech enterprises nationwide transfer their share capital to individual shareholders with undistributed profits, surplus reserves, and capital reserves, if the individual shareholders have difficulties in paying individual income tax at one time, they can formulate an installment payment plan according to the actual situation, and pay it in installments within no more than 5 calendar years (inclusive). and report the relevant information to the in-charge tax authorities for the record. "Listed small and medium-sized high-tech enterprises are not subject to the installment tax policy stipulated in this notice."

The installment tax policy is not applicable to the installment tax policy for individuals who have obtained listed companies or enterprises listed on the National Equities Exchange and Quotations (hereinafter referred to as the "public offering and transfer market") with undistributed profits, surplus reserves, and capital reserves (excluding the conversion of capital reserves formed by stock issuance premiums) into share capital, and continue to be implemented in accordance with the current differentiated policies on dividends and dividends: first, if the holding period exceeds 1 year, the income from dividends and dividends shall be temporarily exempted from individual income tax; Second, if the holding period is less than 1 month (inclusive), the dividend income will be fully included in the taxable income; Third, if the holding period is more than 1 month to 1 year (inclusive), 50% of the shareholding period shall be temporarily reduced to include the taxable income.

(2) Treatment of enterprise income tax

Exemption from enterprise income taxWhen the investee enterprise converts retained earnings (undistributed profits and surplus reserves) into share capital, the investor shall treat it as dividends and bonuses, and at the same time increase the tax basis of the investment. The company converts undistributed profits, statutory reserve funds and arbitrary reserve funds into registered capital, in fact, the company distributes dividends and bonuses to shareholders with undistributed profits and surplus reserves, and the shareholders increase their registered capital with the dividends and bonuses they receive. According to Article 26 of the Enterprise Income Tax Law of the People's Republic of China, "the following income of an enterprise is tax-exempt income: (1) dividends, bonuses and other equity investment income between qualified resident enterprises; Article 83 of the Regulations for the Implementation of the Enterprise Income Tax Law of the People's Republic of China stipulates that "the term "dividends, bonuses and other equity investment income between qualified resident enterprises" referred to in Item (2) of Article 26 of the Enterprise Income Tax Law refers to the investment income obtained by resident enterprises from direct investment in other resident enterprises. The term "dividends, bonuses and other equity investment income" as mentioned in Items (3) and (4) of Article 26 of the Enterprise Income Tax Law does not include investment income obtained from holding shares publicly issued and listed for circulation of resident enterprises for less than 12 consecutive months. Therefore, if the shareholder is a legal person or a company, when the undistributed profits and surplus reserves of the invested enterprise are converted into capital, the part of the registered capital increased by the corporate shareholder in accordance with the proportion of investment is exempt from enterprise income tax. However, enterprise income tax shall be levied on the investment income obtained from holding the publicly issued and listed shares of a resident enterprise for less than 12 months.

(4) Risk warning

If the capital reserve of the four types of capital that cannot be converted into capital is converted into capital, it is subject to enterprise income tax:

1. Capital reserve arising from changes in the owner's equity of the investee other than net profit or loss for long-term equity investments accounted for by the equity method.

According to the Accounting Standards for Business Enterprises No. 2 - Long-term Equity Investment, "if the long-term equity investment is accounted for by the equity method, the share of the investee other changes in the owner's equity other than the net profit or loss shall be included in the capital reserve calculated according to the proportion of shareholding, and the part originally included in the owner's equity shall be transferred to the current profit or loss in the corresponding proportion when the investment is disposed of".

2. Capital reserve arising from the difference between the fair value of available-for-sale financial assets and their carrying amount at the balance sheet date.

The China Securities Regulatory Commission's Reply to the Consultation Letter on Accounting Issues (Accounting Department Letter [2008] No. 50) stipulates that "gains or losses arising from changes in the fair value of available-for-sale financial assets, in addition to impairment losses and exchange differences formed by foreign currency monetary financial assets, shall be directly included in owners' equity (other capital reserves)." Before the relevant laws and regulations clearly stipulate, the above-mentioned fair value changes included in other capital reserves shall not be used to convert shares for the time being; The income from the change in fair value of the relevant assets measured at fair value shall not be used for profit distribution for the time being. "This capital reserve shall be directly credited to the owner's equity (other capital reserve). Before the relevant laws and regulations clearly stipulate, this part of the difference shall not be used to increase capital for the time being.

3. Capital reserve arising from the conversion of self-occupied real estate or inventory into investment real estate measured using the fair value model, and the fair value is greater than its carrying amount on the date of conversion. According to the Accounting Standard for Business Enterprises No. 3 - Investment Real Estate, the capital reserve shall be transferred to the current profit or loss when the investment real estate is disposed of, so it shall not be used to increase capital.

4. Capital reserve arising from the difference in the reclassification of financial assets. According to the Accounting Standard for Business Enterprises No. 22 - Recognition and Measurement of Financial Instruments, the transfer of the financial asset when it is disposed of shall be included in the profit or loss for the current period, and the capital shall not be increased before the financial asset is disposed of.

If the part that should be included in income and profit is mistakenly included in the "capital reserve", it should be treated according to the accounting error first, adjust the taxable income, and pay the enterprise income tax accordingly.

(5) Case analysis

Case 1: Based on the company's total share capital of 2 million shares on December 31, 2011, a company distributed cash dividends of RMB 1.00 (tax included) to all shareholders for every 10 shares, with a total profit of RMB 200,000. Based on the company's total share capital of 2 million shares on December 31, 2011, the company increased 8 shares for every 10 shares of capital reserve to all shareholders, of which the capital reserve formed by equity (vote) premium was converted into 2 shares, with a total of 1.6 million shares of capital reserve converted into share capital. The company's resident shareholders and non-resident shareholders of domestic establishments enjoy 60% and 40% of the total share capital, respectively.

Analysis: In the case that the capital reserve formed by the equity (vote) premium is converted into share capital, it is not recognized as a dividend, that is, 200÷10×2=40 (10,000 yuan), and is not used as the dividend and bonus income of the investor's enterprise, and is not subject to enterprise income tax according to the provisions of the Guo Shui Han [2010] No. 79 document. Therefore, the shareholder of the resident enterprise should confirm the dividend of 20×60%+(160-40)×60%=84 (10,000 yuan), and be exempted from corporate income tax; Dividends and dividends of shareholders of non-resident enterprises = 20×40% + (160-40) ×40% = 56 (10,000 yuan), exempt from corporate income tax.

Case 2: A company limited by shares A is invested and established by three natural persons, A, B and C, with an investment ratio of 5..3..2. In order to expand the total amount of capital, it was decided to use the surplus reserve fund and capital reserve of the enterprise to increase the capital. It is required to calculate the individual income tax payable by A, B and C respectively. Its accounting treatment is as follows:

The amount of converted share capital obtained by individuals is not regarded as personal income and is not subject to individual income tax; The distribution of bonus shares by joint-stock enterprises using surplus reserve funds is in the nature of dividends and bonuses, and the amount of bonus shares obtained by individuals shall be taxed as personal income. Therefore, shareholder A should pay personal income tax = 600 000× 50% × 20% = 60 000 (yuan); Shareholder B should pay personal income tax = 600,000×30%×20%=36,000 (yuan); Shareholder C should pay personal income tax = 600 000× 20% × 20% = 24 000 (yuan). The above tax is withheld and paid by Company A, which distributes the bonus shares.

Case 3: Company A was listed in September 2014 with a total share capital of 18 million. Suppose that only natural person A and B hold shares of 9 million yuan each. After the company was listed, on August 1, 2015, 2 million shares were added to natural person C at a price of 3 yuan per share, and the company's capital reserve formed due to the share capital premium was 4 million yuan. Company A's other capital reserve is 1 million yuan (subject to transferable increase). Suppose that Company A converts all of its capital reserve of RMB 5 million into share capital on October 10, 2015. According to the document, Company A does not pay the individual income tax of the individual shareholders for the part of the capital reserve formed by the capital premium to increase the share capital to the individual shareholders.

The part of other capital reserves to be increased: After the fixed increase, A and B currently account for 45% of the equity of Company A, and the individual income tax calculated separately = (100×45%)× 20% = 9 (10,000 yuan)

Because the shareholding period of A and B is more than 1 year, the individual income tax on the part of the transfer will be exempted.

If the shareholding period of individual shareholder C is more than 1 month to 1 year, it can be temporarily reduced by 50% to be included in the taxable income.

After the fixed increase, C accounts for 10% of the equity of Company A, and shall pay individual income tax = (100×10%)× 50%×20% = 1 (10,000 yuan).

5. Equity incentives

(1) Overview

Equity incentive is an incentive method that gives certain economic rights to business operators in the form of obtaining the company's equity, and is an incentive method for them to participate in corporate decision-making, share profits and bear risks as shareholders, so as to serve the long-term development of the company diligently and responsibly.

There are generally three types of equity incentives: stock options, restricted stocks, and stock appreciation rights. Stock (right) option refers to the right granted by the company to the incentive object to purchase the company's stock (right) at a pre-agreed price within a certain period of time. Restricted stock refers to the shares of the company granted to the employees of the company by the listed company in accordance with the conditions agreed in the equity incentive plan. The right to stock appreciation refers to the right granted by a listed company to its employees to obtain the benefits brought by the increase in the price of a specified number of shares in a certain period of time and under agreed conditions in the future. If the authorized person exercises the rights under the agreed conditions, the listed company will issue cash to the authorized person according to the difference between the secondary market stock price on the exercise date and the authorization date multiplied by the number of authorized shares.

(2) Policy basis

Corporate income tax

(SAT Announcement [2012] No. 18)

Personal income tax

1. (CS [2005] No. 35) (some provisions are invalid)

2. (Guo Shui Han [2006] No. 902) (some provisions are invalid)

3. 《Cai Shui [2009] No. 5)

4. (Guo Shui Han [2009] No. 461) (some provisions are invalid)

5. 《Cai Shui [2015] No. 116)

6. 《《Cai Shui [2016] No. 101)

7. Announcement No. 62 [2016] of the State Administration of Taxation)

8. 《《Cai Shui [2018] No. 164)

(3) Tax treatment

Corporate income tax

Article 2 of the Announcement No. 18 of 2012 of the State Administration of Taxation clearly states: "A listed company shall establish an employee equity incentive plan in accordance with the requirements of the Administrative Measures, and in accordance with the relevant provisions of the Accounting Standards for Business Enterprises in the mainland, when the equity incentive plan is granted to the incentive object, the cost or expense of the listed company for the relevant year shall be calculated and determined according to the fair price and quantity of the stock, as consideration for the services provided by the incentive object." The treatment of enterprise income tax of the employee equity incentive plan established by the above-mentioned enterprises shall be implemented in accordance with the following provisions:

(1) If the equity incentive plan can be exercised immediately after the implementation of the equity incentive plan, the listed company may calculate and determine the difference and quantity between the fair price of the stock at the time of actual exercise and the actual exercise price of the incentive object as the wage and salary expenses of the listed company in the current year, and make a pre-tax deduction in accordance with the provisions of the tax law.

(2) After the implementation of the equity incentive plan, the rights can only be exercised after a certain number of years of service or when the prescribed performance conditions are met (hereinafter referred to as the waiting period). The relevant costs and expenses calculated and recognized in the accounting during the waiting period of the listed company shall not be deducted when calculating and paying the enterprise income tax in the corresponding year. After the equity incentive plan is exercised, the listed company can calculate and determine the difference and quantity between the fair price of the stock when it is actually exercised and the price paid by the incentive object in the current year, and make a pre-tax deduction in accordance with the provisions of the tax law.

(3) The fair price of the stock at the time of actual exercise shall be determined by the closing price of the stock on the actual exercise date. ”

Personal income tax

1. Stock options

Article 2 of the "Cai Shui [2005] No. 35) stipulates:

"(1) When an employee accepts a stock option granted by an enterprise implementing a stock option plan, it is generally not taxable as taxable income unless otherwise specified.

(2) When an employee exercises his or her rights, the difference between the actual purchase price (exercise price) of the shares obtained from the enterprise and the fair market price on the purchase date (referring to the closing price of the stock on the same day, the same below) is the income related to the position and employment obtained by the employee due to the employee's performance and performance in the enterprise, and the individual income tax shall be calculated and paid in accordance with the applicable provisions of 'income from wages and salaries'.

For employees who transfer stock options before the exercise date due to special circumstances, the net income from the transfer of stock options shall be levied as income from wages and salaries (Article 2 of the "" (Guo Shui Han [2006] No. 902) clearly states: 'net income from the transfer of stock options' generally refers to the income from the transfer of stock options; if the employee obtains stock options by way of discounted purchase, the balance of the stock option transfer income after deducting the price actually paid when the stock option is purchased at the discount can be used as the net income from the transfer of stock options).

The taxable income of wages and salaries shall be calculated according to the following formula: taxable income of wages and salaries in the form of stock options = (market price per share of exercised stocks - exercise price per share paid by employees to obtain stock options) × number of shares ("" (Guo Shui Han [2006] No. 902) Article 3 clearly states that 'the exercise price per share paid by employees to obtain stock options' generally refers to the price per share actually paid by employees for exercising stock options to purchase stocks. If an employee obtains a stock option at a discount, the above exercise price may include the price actually paid by the employee at the time of purchasing the stock option at a discount).

(3) The difference between the equivalence and the fair market value obtained by the employee when he or she re-transfers the shares after the exercise of the rights is the income obtained by the individual from the transfer of stocks and other negotiable securities in the secondary market of securities, and the individual income tax shall be calculated and paid in accordance with the applicable exemption provisions of the 'income from property transfer'. That is, the income obtained by an individual from the re-transfer of the shares of a domestic listed company after the exercise of rights shall not be subject to individual income tax for the time being; The income obtained by an individual from the transfer of shares of an overseas listed company shall be calculated in accordance with the provisions of the tax law and the tax payable, and the tax shall be paid in accordance with the law.

(4) The income obtained by employees from participating in the after-tax profit distribution of enterprises due to equity ownership shall be calculated and paid in accordance with the applicable provisions of 'interest, dividends and bonus income', that is, the dividends and bonus income obtained by employees from owning equity to participate in the distribution of after-tax profits shall be fully calculated and taxed at the prescribed tax rate, except for those that can be taxed or reduced in accordance with the relevant regulations. ”

2. Stock appreciation rights

(Guo Shui Han [2009] No. 461) clarifies:

"1. Determination of the income items and tax calculation methods of equity incentives

According to the Individual Income Tax Law and its implementing regulations, as well as the Cai Shui [2009] No. 5 document, the individual income tax of the stock appreciation rights obtained by an individual from a listed company due to his position or employment shall be withheld by the listed company or its domestic institutions in accordance with the individual income tax calculation method of 'income from wages and salaries' and the income from stock options.

2. Determination of the taxable income of stock appreciation rights

The income obtained by the authorized person of the stock appreciation right is the cash paid directly by the listed company to the authorized person according to the difference between the stock price on the grant date and the exercise date multiplied by the number of authorized shares. The listed company shall withhold the individual income tax of the authorized person of the stock appreciation right in accordance with the law when it is redeemed to the authorized person of the stock appreciation right. The formula for calculating the taxable income of the authorized person's stock appreciation right is as follows: the taxable income of a certain exercise of the stock appreciation right = (stock price on the exercise date - stock price on the authorization date) × number of shares exercised. ”

3. Restricted Stock

(Guo Shui Han [2009] No. 461) clarifies:

"1. Determination of the income items and tax calculation methods of equity incentives

According to the provisions of the Individual Income Tax Law and its implementing regulations and the Cai Shui [2009] No. 5 document, the income of restricted stocks obtained by individuals from listed companies due to their positions or employment shall be withheld and paid by the listed companies or their domestic institutions in accordance with the individual income tax calculation method of 'income from wages and salaries' and the income from stock options. ”

"3. On the determination of the taxable income of restricted stocks

In accordance with the relevant provisions of the Individual Income Tax Law and its implementing regulations, in principle, the taxable income derived from restricted shares should be recognized when the ownership of restricted shares is vested in the incentive recipient. That is, when a listed company implements a restricted stock plan, it shall multiply the average price of the market price of the restricted shares of the incentive object on the date of stock registration in the China Securities Depository and Clearing Corporation (referring to the closing price of the day, the same below) and the market price of the current batch of unrestricted shares (referring to the closing price of the day, the same below) by the number of shares released in the current batch, and subtract the actual amount of funds paid for obtaining the restricted shares corresponding to the number of shares released by the incentive object in this batch, and the difference is the taxable income. The formula for calculating the taxable income of the restricted shares of the incentive object is as follows: taxable income = (the market price of the stock on the stock registration date + the market price of the stock released on the day of the current batch) ÷2× the number of shares released in this batch - the total amount of funds actually paid by the incentive object× (the number of shares released in this batch ÷ the total number of restricted shares obtained by the incentive object). ”

4. Tax deferral policy

The first paragraph of Article 1 (CS [2016] No. 101) stipulates that: "If a non-listed company grants stock options, equity options, restricted shares and equity awards to its employees and meets the prescribed conditions, it may implement a tax deferral policy after filing with the competent tax authorities, that is, employees can temporarily withhold tax when obtaining equity incentives and defer tax payment until the transfer of the equity; In the case of equity transfer, the "income from property transfer" item shall be applied according to the difference between the equity transfer income after deducting the cost of equity acquisition and reasonable taxes and fees, and the individual income tax shall be calculated and paid at a rate of 20%. In the case of equity transfer, the acquisition cost of stock (right) options is determined according to the exercise price, the acquisition cost of restricted shares is determined according to the actual amount of capital contribution, and the acquisition cost of equity awards is zero. ”

Article 2 of the "CS [2016] No. 101) stipulates that: "For stock options, restricted stocks and equity awards granted to individuals by listed companies, individuals may pay individual income tax within a period of no more than 12 months from the date of exercise of stock options, release of restricted shares or acquisition of equity awards after filing with the competent tax authorities."

If an individual obtains shares (rights) from an employed enterprise at a price lower than the fair market price, if it does not meet the conditions for deferred tax payment, it shall, at the time of obtaining the shares, calculate and pay individual income tax on the difference between the actual capital contribution and the fair market price, according to the item of 'income from wages and salaries'. ”

The first paragraph of Article 4 of the "Cai Shui [2015] No. 116) clearly states: "Since January 1, 2016, high-tech enterprises nationwide have transformed scientific and technological achievements and given equity awards to relevant technical personnel of the enterprise, and if individuals have difficulties in paying taxes at one time, they can formulate an installment payment plan according to the actual situation, pay in installments within no more than 5 calendar years (inclusive), and report the relevant information to the competent tax authorities for the record." ”

For the specific implementation of the above deferred tax policy, please refer to the Announcement No. 62 [2016] of the State Administration of Taxation.

5. Measures for calculating tax payable

Article 2 of the CS [2018] No. 164) stipulates that:

"(1) The acquisition of equity incentives such as stock options, stock appreciation rights, restricted stocks, and equity awards by resident individuals (hereinafter referred to as equity incentives) is in accordance with the Notice of the Ministry of Finance and the State Administration of Taxation on Issues Concerning the Levy of Individual Income Tax on Income from Individual Stock Options (CS [2005] No. 35), the Notice of the Ministry of Finance and the State Administration of Taxation on Issues Concerning the Levy of Individual Income Tax on Income from Stock Appreciation Rights and Income from Restricted Stocks (CS [2009] No. 5), and the Ministry of Finance Article 4 of the Notice of the State Administration of Taxation on Promoting the Relevant Tax Pilot Policies of the National Independent Innovation Demonstration Zone to the Nationwide Implementation (CS [2015] No. 116) and Article 4 (1) of the Notice of the Ministry of Finance and the State Administration of Taxation on Improving the Income Tax Policies Related to Equity Incentives and Technology Shareholding (CS [2016] No. 101) shall not be included in the comprehensive income of the current year before December 31, 2021, and the comprehensive income tax rate table shall be applied separately for the full amount to calculate the tax. The calculation formula is: tax payable = equity incentive income × applicable tax rate - quick deduction

(2) If a resident individual obtains more than two (including two) equity incentives in a tax year, the tax shall be calculated and paid in accordance with the provisions of Article 2 (1) of this Notice.

(3) The equity incentive policy after January 1, 2022 will be clarified separately. ”

(4) Risk warning

1. Confirm the time

According to Article 34, the wages and salaries of an enterprise must be paid annually. However, the implementation of equity incentive plans by listed companies is subject to certain conditions, which may not be met during the implementation process; In addition, changes in the stock market may also affect the exercise of the option (e.g., the grant price is higher than the market price of the stock at the time of exercise), and the tax law does not allow the deduction to be made at that time. Therefore, according to the provisions of the tax law, such expenses should be deducted when the incentive recipient exercises the rights.

2. Confirm the amount

Since the wages and benefits of an enterprise stipulated in the tax law are determined as costs and expenses on the basis of the actual payment date, and market fluctuations and other factors are not considered, when confirming that the employee equity incentive plan established by the enterprise is deducted as wages and salaries, it is determined according to the difference between the fair price of the stock and the actual price paid by the employee when the employee actually exercises the stock and the number of rights exercised. Accordingly, the expenses recognized in the accounting should be adjusted at the time of the annual tax return of the waiting period. In the annual tax return of the year in which the rights are actually exercised, tax adjustments should be made to the difference between the expenses recognized in the accounting year and the pre-tax deductible wages and salaries expenses.

3. Individual income tax withholding and payment

Article 5 of the CS [2016] No. 101 stipulates that:

"(1) If the enterprise chooses to apply the deferred tax policy to equity incentives or investment in technological achievements, it shall go through the filing formalities with the in-charge tax authorities within the prescribed time limit. Those who have not gone through the filing formalities shall not enjoy the preferential policy of deferred tax as stipulated in this notice.

(2) Where an enterprise implements an equity incentive or an individual invests in shares with technological achievements, the enterprise that implements the equity incentive or obtains technological achievements is the individual income tax withholding agent. During the tax deferral period, the withholding agent shall report the tax deferred to the in-charge tax authority after the end of each tax year. ”

(5) Case analysis

Case 1: On 1 January 2015, a listed company granted 10,000 stock options to each of its 100 managers, stipulating that if these employees had served the company for 3 consecutive years from 1 January 2015, they could purchase 10,000 shares of the company at a price of $10 per share. The company calculated that the fair value of the option on the grant date was 9 yuan, and 4 people actually left in the first year, and the total number of employees in the third year is expected to be 10. Two people actually left the company in the second year, and one more is expected to leave in the future, resulting in a total of 6 employees leaving the company in the middle of the year. Assuming that the remaining 94 employees all exercise their shares on December 31, 2017, the par value of the company's shares is $1 and the fair value of the shares on the exercise date is $20. The company's corporate income tax rate is 25%, and it is reasonable to estimate that the remaining employees will be able to exercise their rights at maturity at each balance sheet date during the waiting period, and the company will have sufficient taxable income to offset the equity incentive expenses.

Analysis: Since the Enterprise Income Tax Law does not recognize the equity incentive expenses recognized according to the best estimated number of exercising rights in each period during the waiting period, during the three-year waiting period, the company must make tax adjustments every year, include the equity incentive expenses included in the management expenses into the taxable income of each year, and recognize the corresponding deferred income tax assets. In 2017, when the 94 people who met the conditions of the service period actually exercised the rights, the pre-tax deduction of the equity incentive expenses was allowed, and the pre-tax deduction amount was calculated as follows:

The amount of pre-tax deduction of enterprise income tax = (the fair value of the stock at the time of actual exercise - the actual purchase price of the stock) × number of employees exercising = (20-10) ×10000×94 = 9400000 (yuan)

Based on this, it can be seen that a company can deduct 9,400,000 yuan as a wage and salary expense item of employee remuneration when employees actually exercise their rights in 2017.

Case 2: On January 1, 2015, a company granted 50,000 stock options to each of its 20 senior executives, and according to the provisions of the equity incentive, these employees must have served the company for 3 years from the date of grant of the stock options before they can exercise the rights. The fair value of the stock options on the grant date is $6 per share. However, due to unforeseen market reasons, the company's share price fell sharply at the end of 2015, and the fair value of each stock option originally granted fell to $2. On January 1, 2016, the Company's management lowered the exercise price of the option to $6 per share. After the repricing, the fair value of the stock options rose to $4 per share. On December 31, 2015, the company's management estimated that 10% of the trade unions had resigned, and on December 31, 2016, the turnover ratio was revised to 20%, and at the end of 2017, there were 15 people who actually exercised the rights, and the closing price of the stock on the exercise date was 13 yuan per share.

Analysis: The tax law does not recognize the increase in the expense caused by the modification of the exercise price during the waiting period, and the tax adjustment is still required to be made in full, and the pre-tax deduction amount of enterprise income tax will be allowed to be calculated according to the above formula when the incentive object actually exercises the option. According to the provisions of the enterprise income tax law, due to the uncertainty of the number of employees exercising rights during the waiting period, in the three years of 2015~2017, the equity award expenses included in the company's management expenses shall not be deducted before tax, especially in the case of the increase in the fair value of stock options caused by the modification of the exercise price, the expenses cannot be deducted before tax when the employees exercise their rights in the future, and there will be no temporary differences, and the corresponding deferred income tax assets will not be recognized. In 2017, when the 15 persons who met the conditions for the term of service actually exercised the option, the amount of the allowable pre-tax deduction was calculated as follows:

The amount of pre-tax deduction of enterprise income tax = (the fair value of the stock at the time of actual exercise - the actual purchase price of the stock) × the number of employees exercising = (13-6) ×50,000×15=5,250,000 (yuan), that is, the company can deduct 5,250,000 yuan of wages and salaries before tax when the employees actually exercise their rights in 2017.

VI. Related Party Transactions

(1) Overview

Related-party transactions refer to transactions between related parties of an enterprise, which are transactions that often occur in the operation of a company and are prone to unfair results. Related-party transactions mainly exist under the conditions of market economy, and from the advantageous aspect, the two parties to the transaction can save a lot of transaction costs in commercial negotiations and other aspects because of the existence of related relationships, and can use administrative power to ensure the priority execution of commercial contracts, so as to improve transaction efficiency; On the negative side, since the parties to a related party can use administrative power to facilitate the transaction, it is possible that the price and method of the transaction will be unfair under non-competitive conditions, resulting in infringement of the rights and interests of shareholders or some shareholders, and the interests of creditors may also be damaged.

(2) Policy basis

1. (Order No. 63 of the President of the People's Republic of China)

2. Decree No. 512 of the State Council of the People's Republic of China)

3. (Guo Shui Fa [2009] No. 2) (some provisions are invalid)

4. Announcement No. 42 [2016] of the State Administration of Taxation)

5. Announcement No. 64 [2016] of the State Administration of Taxation)

6. Announcement No. 6 [2017] of the State Administration of Taxation)

(3) Tax treatment

1. Provisions on related party transactions

(1) According to Article 41 of the Decree No. 63 of the President of the People's Republic of China, "if the business dealings between an enterprise and its related parties do not comply with the arm's length principle and reduce the taxable income or income of the enterprise or its related parties, the tax authorities shall have the right to adjust it in accordance with reasonable methods."

The costs incurred by an enterprise and its related parties in jointly developing or transferring intangible assets, or jointly providing or receiving services, shall be apportioned in accordance with the arm's length principle when calculating the taxable income. ”

The arm's length principle refers to the principle that parties to a transaction that are not related to each other should conduct business in accordance with arm's length transaction price and business practices.

(2) Verification method

According to Article 111 of the Decree No. 512 of the State Council of the People's Republic of China:

"The reasonable methods referred to in Article 41 of the Enterprise Income Tax Law include:

(1) The comparable uncontrolled price method refers to the method of pricing according to the price at which the parties to the transaction have the same or similar business dealings that are not related;

(2) The resale price method refers to the method of pricing according to the price of goods purchased from related parties and resold to non-related parties, minus the gross sales profit of the same or similar business;

(3) The cost-plus method refers to the method of pricing according to the cost plus reasonable expenses and profits;

(4) The transaction net profit method refers to the method of determining profits according to the level of net profits obtained by the parties to the transaction that are not related to the transaction from the same or similar business dealings;

(5) The profit split method refers to the method of distributing the consolidated profits or losses of an enterprise and its related parties among all parties using reasonable standards;

(6) Other methods that conform to the arm's length principle. ”

(3) Cost allocation

In accordance with the provisions of Paragraph 2 of Article 41 of the Enterprise Income Tax Law, an enterprise may share the costs jointly incurred with its related parties in accordance with the arm's length principle and reach a cost sharing agreement.

When an enterprise and its related parties allocate costs, they shall do so in accordance with the principle of matching costs with expected benefits, and submit relevant materials in accordance with the requirements of the tax authorities within the time limit prescribed by the tax authorities.

If an enterprise violates the provisions of paragraphs 1 and 2 of this Article when apportioning costs to its affiliates, the costs apportioned by the enterprise shall not be deducted in the calculation of taxable income.

2. Determination of affiliation

Articles 2 and 3 of the Announcement No. 42 [2016] of the State Administration of Taxation have relevant provisions.

(1) Equity control

One party directly or indirectly holds more than 25% of the total shares of the other party; Both parties directly or indirectly hold more than 25% of the shares held by a third party. If one party indirectly holds shares in the other party through an intermediary, as long as its shareholding in the intermediary reaches more than 25%, its shareholding in the other party shall be calculated according to the shareholding ratio of the intermediary party to the other party. Where two or more natural persons with husband and wife, lineal blood relatives, siblings, and other dependents or supporters jointly hold shares in the same enterprise, the shareholding ratio shall be calculated together when determining the related relationship. (Note: "The above" includes this number)

For example, if Party A (one party) holds 50% of Party B's (intermediary) shares, and Party B (intermediary) holds 50% of Party C's (the other party's) shares, what is the proportion of Party A's shares in Party C? Since Party A's shareholding in Party B (the intermediary) exceeds 25%, it can be treated as Party B's (intermediary) holding 50% of Party C's shares, that is, Party A is deemed to have 50% of Party C's shares.

Lineal blood relatives refer to relatives who are directly related to oneself, that is, the relatives of all generations who have given birth to themselves and those who have given birth to themselves, including grandparents, maternal grandparents, parents, children, grandchildren, and maternal grandchildren. At the same time, lineal blood relatives also include fictitious lineal blood relatives, such as: adoptive parents and adoptive children, adoptive grandparents and adoptive grandchildren, and dependent stepparents and stepchildren, and the relationship between them is governed by the rights and obligations of natural lineal blood relatives. For example, if the husband and wife jointly hold 30% of the shares according to the combined shareholding ratio, both husband and wife are related to Company A.

(2) Control of borrowed funds

If the two parties have a shareholding relationship or are both held by a third party, although the shareholding ratio does not meet the requirements of paragraph (1) of this Article, the total amount of borrowed funds between the two parties accounts for more than 50% of the paid-in capital of either party, or more than 10% of the total amount of all borrowed funds of one party is guaranteed by the other party (except for loans or guarantees with independent financial institutions).

Ratio of total borrowed funds to paid-in capital = annual weighted average borrowed funds / annual weighted average paid-in capital, where:

Annual weighted average borrowed funds = book amount of borrowed or loaned funds × number of days actually occupied by borrowed or loaned funds in a year/365

Annual weighted average paid-in capital = book amount of paid-in capital × actual number of days of paid-in capital in the year / 365 (Note: the actual number of days occupied in the year is the number of days occupied in the current year)

For example, Company A directly holds 24% of the equity of Company B. In 2016, A borrowed 3 loans from B, namely 30 million (for 50 days), 20 million (for 60 days), and 10 million (for 30 days).

Suppose A's paid-up capital in 2016 is 30 million yuan, and there is no change throughout the year.

The ratio of the total annual borrowed funds of Party A and Party B to Party A's paid-in capital is: (3000*50+2000*60+1000*30)/365/3000=27.4%

From the point of view of A, it does not reach 50%.

If B's paid-in capital in 2016 is 15 million yuan, and there is no change throughout the year, the ratio of the total annual borrowed funds of Party A and Party B to Party B's paid-in capital is (3000*50+2000*60+1000*30)/365/1500= 54.8%

From B's point of view, the criteria for determining the affiliation of the loan funds have been met, so it can be determined that Party A and Party B constitute an affiliated relationship.

(3) Franchise control

If the two parties have a shareholding relationship or are both held by a third party, although the shareholding ratio does not reach the provisions of subparagraph (1) of this Article, the production and business activities of one party must be provided by the other party with patent rights, non-patented technologies, trademark rights, copyrights and other concessions in order to be carried out normally.

Therefore, in practice, as long as the main production and business activities of one party (not owned) are provided by the other party such as patent rights, non-patented technologies, trademark rights, copyrights, etc., it can be determined that the two parties have a related relationship. 4S stores and franchise stores that are only controlled by franchises but do not have a shareholding relationship are not included.

(4) Purchase, sale and labor control

Where both parties have a shareholding relationship or are both held by a third party, although the shareholding ratio does not reach the requirements of subparagraph (1) of this Article, the business activities of one party such as purchasing, selling, accepting and providing labor services are controlled by the other party. Such control means that one party has the right to determine the financial and operational policies of the other party and to derive benefits from the other party's business activities.

Control consists of two elements: first, one party has the right to decide on the financial and business strategies of the other party, such as transaction conditions, transaction pricing principles, etc.; The second is that one party obtains present or future economic benefits from the other party's business activities by deciding on the other party's business activities such as purchasing, selling, and providing services.

(5) Control by directors or officers

More than half of the directors or more than half of the senior management personnel of one party (including the secretary of the board of directors, managers, deputy managers, financial directors and other personnel specified in the articles of association of the listed company) are appointed or appointed by the other party, or serve as directors or senior management of the other party at the same time; or more than half of the directors or more than half of the senior management of each party are appointed or appointed by a third party.

(6) Determination of kinship related parties

Two natural persons who have a relationship of husband and wife, lineal blood relatives, brothers and sisters, and other relationships of support or support respectively have one of the relationships in items (1) through (5) of this article with both parties.

For example, if the husband is related to Company A and Company B, and the wife is affiliated with Company C, then Company A, B and Company C are all related.

and (7) the parties have other common interests in substance

In the tax law, the principle of "substance over form" is required and embodied in the determination of related relationships. For example, the two parties jointly participate in major business activities such as project research and development, contracting projects, design labor services, or jointly providing material procurement and marketing for other enterprises, or for the needs of competition, the two parties jointly monopolize the market and influence market selection and pricing.

(8) Add the provision that the related relationship shall be determined in accordance with the actual duration of the relationship

In addition to the control of borrowed funds, if there is a change in the related relationship during the year, the related relationship shall be determined according to the actual duration of the relationship.

(9) It is clarified that the state's shareholding or appointment of directors and senior executives does not constitute an affiliated relationship

If there is a relationship in items (1) to (5) of Article 2 of the Announcement of the State Administration of Taxation on Improving Related Matters Concerning Related Party Declaration and Contemporaneous Data Management (Announcement No. 42 of 2016 of the State Administration of Taxation) solely because of the state's shareholding or the appointment of directors and senior management personnel by the state-owned asset management department, it does not constitute an affiliated relationship as referred to in this announcement.

3. Types of related party transactions

(1) Transfer of the right to use or ownership of tangible assets

Tangible assets include goods, products, buildings, vehicles, machinery and equipment, tools and appliances, etc.

(2) Increase the number of financial asset transfer transactions

Transfer of financial assets. Financial assets include accounts receivable, notes receivable, other receivables, equity investments, debt investments and assets formed by derivative financial instruments.

(3) Supplement the scope of intangible assets

Transfer of the right to use or ownership of intangible assets. Intangible assets include patent rights, non-patented technologies, trade secrets, trademark rights, brands, customer lists, sales channels, franchise rights, government licenses, copyrights, etc.

(4) Increase the capital pool business in the financing capital transaction

Financing. Funds include all kinds of long-term and short-term loan funds (including the group's capital pool), guarantee fees, various interest-bearing prepayments and deferred payments.

(5) Scope of supplementary labor transactions

Labor transactions. Labor services include market research, marketing planning, agency, design, consulting, administrative management, technical services, contract research and development, maintenance, legal services, financial management, auditing, recruitment, training, centralized procurement, etc.

4. Enterprises that need to make related party declarations

(1) A resident enterprise that implements audit and collection, and has business dealings with its related parties during the year.

(2) Non-resident enterprises that have established institutions and places in China and have truthfully declared and paid enterprise income tax, and have business dealings with their related parties during the year.

(3) Enterprises that are required to fill in the CbC report according to the regulations.

(4) Risk warning

1. Avoid the income from related party transactions that are obviously unreasonable

The price of the products (services) sold by the enterprise to the affiliated enterprise is obviously high (low), the high side causes the cost of the related party to increase, and the low price causes the income of the enterprise to decrease.

2. Avoid unreasonable cost allocation among affiliated enterprises

Many affiliated enterprises are actually "one set of people, two brands", and how to share the cost between the two enterprises has become a problem, and the enterprise has "planned" to share more in a certain enterprise, resulting in a decrease in the overall tax burden.

(5) Case analysis

Case 1: A tax authority successfully investigated and dealt with an abnormal transaction at an ultra-low price between affiliated enterprises based on the abnormal change of non-operating expenses. In this case, the inspectors found that the company had sold fixed assets such as CNC machine tools and molds at low prices, with the original value of assets of 1.2 million yuan, and the net asset value was still 1.17 million yuan at the time of sale, but the total selling price was less than 700,000 yuan. In the face of the shrinkage of nearly half of the fixed assets, especially some of the newly purchased equipment, which is also "5% off", why is the company so generous "self-sacrifice"? What kind of greasy is hidden in the meantime? The inspectors vaguely felt that this "non-operating expenditure" caused by the liquidation of fixed assets was far from being as clear and clear as recorded in the books. After some inspection, the inspectors found clues from the invoice bookkeeping link, the ticket shows that the mold buyer is a machinery limited company, the machine tool buyer is also this machinery limited company, a detailed view, all fixed assets were sold to the same company in batches, the inspectors further verified the specific information, and found that the legal representative of the two companies is actually the same person, "affiliated enterprises, related transactions, re-verification of transaction prices", the inspection ideas are clearly presented in the minds of the inspectors. By extracting the information of the legal persons of the two sides, comparing the business licenses of the two sides, and inquiring about the current market price of the trading equipment, all preparations were ready, and the inspectors interviewed the person in charge of the company again. Seeing all kinds of evidence in the possession of the inspectors, the person in charge of the company stated the fact that the enterprise had separated production and commerce due to the expansion of production and operation, and had chosen another site to build a factory, and admitted that the affiliated enterprises had sold fixed assets at a low price in violation of the tax-related law.

Analysis: According to the relevant provisions of the Enterprise Income Tax Law, if an enterprise does not provide information on its business dealings with its related parties, or provides false or incomplete information that fails to truly reflect its related party business dealings, the tax authorities have the right to verify its taxable income in accordance with the law. At the same time, in accordance with the relevant provisions of Cai Shui [2008] No. 170 document, the tax authority shall treat the fixed assets as sales as stipulated in Article 4 of the Detailed Rules for the Implementation of the Provisional Regulations on Value-Added Tax, and if the sales amount of used fixed assets cannot be determined, the net value of fixed assets shall be used as the sales amount, and the sales behavior of the company shall be recognized as the income according to the net asset value. Accordingly, the inspectors ordered the company to pay 82,000 yuan of value-added tax and increase the taxable income of the enterprise by 480,000 yuan according to the difference between the net value of the fixed assets sold and the selling price.

Case 2: A tax authority recently successfully concluded a case of illegal tax planning of an affiliated enterprise, which involved two construction machinery industry enterprises A and B, because the two enterprises were affiliated enterprises, the case selection team assigned the two cases involving A and B to the same inspection team, and filed the case at the same time for simultaneous inspection.

After an in-depth investigation, the inspection team learned the truth: A and B were originally the same company, with the same address and the same set of people, and the typical "one set of people and two brands". In 2004, enterprise A took out a workshop to register enterprise B, mainly to enjoy the preferential enterprise income tax policy of "two exemptions and three halves". After the initial investigation of the situation, the inspectors realized that the subject of the investigation had a strong sense of tax "planning", first "planning" enterprise A to enjoy the preferential tax rate of 15% for high-tech enterprises, and then set up enterprise B to enjoy the preferential policy of "two exemptions and three halves" for foreign-funded enterprises. Through these two tax incentives alone, enterprises can save tens of millions of yuan in taxes.

Through analysis and discussion, the inspection team believes that since the two enterprises are really "one set of people and two brands", it is very likely that the two enterprises have the problem of artificially adjusting the cost allocation in order to achieve tax avoidance. After that, the inspection team conducted two inspections

The production and operation sites of the enterprise were investigated, and the persons in charge of the production, sales, R&D and other departments of the enterprise were interrogated, and the personnel lists and employee insurance data of the two enterprises were obtained. After a series of work, the inspection team found that the management, sales and R&D personnel of the two enterprises were shared. Through comparing and analyzing the financial data of the two enterprises, the inspection team found that when the sales revenue of the two enterprises were similar, the expenses incurred by enterprise A during the period were two or three times that of enterprise B, and the income and expenses were seriously disproportionate. In the end, the relevant parties of enterprise A admitted that the management, sales and R&D personnel expenses shared by enterprises A and B were all included in the period expenses of enterprise A, and enterprise B only paid a small amount of period expenses in the form of service fees paid to enterprise A, so as to achieve the purpose of "transferring profits and paying less taxes by means of over-listing expenses by high-tax enterprises and under-listing expenses by low-tax enterprises".

Analysis: The inspection team proposed that, in accordance with Article 41 of the Enterprise Income Tax Law and the principle of substance over form, the amount of expenses incurred during the period between the two affiliated enterprises A and B should be reasonably apportioned. In addition, in the process of checking the fixed assets card and purchase contract of the enterprise, the inspection team found that both enterprises had the situation that the arrival and installation date of the production equipment partially deducted from the VAT tax was before December 31, 2008, so it pointed out in accordance with the relevant regulations that the enterprise was not allowed to deduct the input VAT of this part of the fixed assets, and the input VAT should be transferred out.

Both companies agreed with the above-mentioned tax treatment opinions. In the end, the case recovered 2.1651 million yuan of value-added tax and 2.8583 million yuan of enterprise income tax from the enterprise, and imposed a late fee of more than 640,000 yuan.

After the inspection, the person in charge of the investigated enterprise realized that such a tax "planning" was not only inconvenient to manage, but also had tax risks, so he followed the advice of the inspection team and merged the two enterprises into one and returned to the normal operation track.

Chapter III: Reminders for Tax Credit Assessments

In order to standardize the management of tax credit, promote taxpayers' integrity and self-discipline, improve compliance with tax laws, and promote the establishment of a social credit system, the State Administration of Taxation has formulated the "Announcement No. 40 [2014] and the "Announcement No. 48 [2014] of the State Administration of Taxation, which came into force on October 1, 2014. The document stipulates the principles, methods and detailed evaluation indicators of tax credit evaluation, some of which involve some tax-related risks that taxpayers are prone to be deducted points due to neglect in daily management.

Chapter IV Capital Market Support Policies

1. Notice of the People's Government of Guangdong Province on Printing and Distributing Several Policies and Measures to Reduce the Cost of Manufacturing Enterprises in Guangdong Province to Support the Development of the Real Economy (Revised Edition) (Yuefu [2018] No. 79)

2. Notice of the Office of the People's Government of Qingyuan Municipality on Printing and Distributing the Measures for Supporting the Listing of Enterprises in Qingyuan City

(Qing Fu Ban [2017] No. 76)

3. Notice of the Office of the People's Government of Qingyuan Municipality on Printing and Distributing the Trial Measures for Encouraging Enterprises to Enter the National Small and Medium-sized Enterprise Share Transfer System for Listing and Trading (Qingfu Ban [2016] No. 84)

Authors: AK@CapMarket Tax ; Source: AK CapMarket TAX. The content of this article is for general information purposes only and is not intended as formal auditor, accounting, tax or other advice, and we cannot guarantee that such information will remain accurate in the future. No person should act on the basis of the information contained herein without having due regard to the relevant circumstances and obtaining appropriate professional advice. The articles reproduced in this issue are for academic exchange purposes only. The original copyright of the article or material belongs to the original author or original copyright owner, and we respect copyright protection. If you have any questions, please contact us, thank you!