What is a Transfer Tax?

Equity transfer tax is a tax that is raised in accordance with the Business Tax Tax Notes (Trial Draft).

Equity transfer tax

Right!

Equity transfer tax is a tax that is raised in accordance with the Business Tax Tax Notes (Trial Draft).

Chinese name

Equity transfer tax

in accordance with

Notes on Business Tax Tax Items (Trial Draft)

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National Taxation [1993] No. 149

Tax liability

3

Definition of equity

Equity transfer is a concept of company law, but it is closely related to taxation. In order to strengthen the tax management of equity transfers, the State Administration of Taxation has issued relevant tax policies that have played a certain role in strengthening management. ^[1]

First, the loss of corporate equity transfer tax is more serious. Many corporate taxpayers are liable to be negligent when it comes to whether they pay taxes, what taxes they need to pay, and how to calculate and pay.

Second, the transfer of equity is sporadic. Equity transfer is a major change for enterprises. Not every enterprise will happen. For an enterprise, equity transfer will not happen often under normal circumstances. Therefore, whether it is for enterprises or tax authorities, equity transfer None of the tax-related businesses is a recurring business and has certain contingencies.

Third, the transfer of equity is hidden. Some taxpayers do not know much about the tax liability of equity transfers, they fail to take the initiative to make tax declarations for the taxable behavior of equity transfers, and the tax authorities cannot understand the ownership transfers of enterprises in a timely manner. There is also a sense of fortunateness. In order to avoid taxation, intentional concealment of equity transfers, and tax information asymmetry makes it difficult for tax authorities to organize effective prior monitoring, and tax supervision often lags.

Fourth, equity transfer prices are often false. Because the price of equity transfer is directly related to the vital interests of the equity transferor, there is a subjective motive for the equity transferor to conceal the equity transfer price. For tax authorities, it is necessary to verify the authenticity of the equity transfer price. No effective social assessment mechanism has been formed.

(I) Stamp Duty

The frequency of equity transfers is not high, and many taxpayers do not yet know that deeds are needed for equity transfer documents. In fact, stamp tax, as a behavioral tax, must be decalmed as long as the taxpayer issues a document and receives the taxable vouchers listed in the "Interim Regulations of the People's Republic of China on Stamp Taxes". The documents issued by the equity transfer belong to the stamp tax tax item, that is, "property ownership" in the tax item of the "property transfer instrument", which is decalmed at five ten thousandths of the amount contained.

(II) Personal income tax

Many taxpayers and withholding agents have a more one-sided understanding of the tax liability on personal income tax that may be involved in the transfer of equity. They believe that as long as natural person shareholders transfer equity at a par or low price, they have no income and do not need to declare or withhold personal income tax; Some transferees do not know that they have the obligation to withhold their personal income tax when paying equity transfers to the assignor (the original natural person shareholder), thereby adding unnecessary costs and losses to both parties. I will sort out the relevant policies.

1. Applicable tax items. Article 9 of Article 2 of the "Personal Income Tax Law of the People's Republic of China" (hereinafter referred to as the "Personal Income Tax Law") stipulates that income from property transfers shall be subject to personal income tax. Article 8 (9) of the "Implementation Regulations of the People's Republic of China on the Personal Income Tax Law" (hereinafter referred to as the "Implementation Regulations") stipulates that the income from equity transfers belongs to the income from property transfers.

2. Calculation of taxable income. Article 22 of the Implementing Regulations stipulates that the income from property transfer shall be the taxable income based on the balance of the income of the transferred property after deducting the original value of the property and reasonable expenses.

As for the income from equity transfer, its taxable income amount = equity transfer price-equity tax calculation cost-stamp taxes and other taxes and fees related to equity transfer.

3. Tax rates. According to Article 5, Item 5 of the Personal Income Tax Law, a proportional tax rate of 20% applies to income from property transfers.

4. Taxpayers and withholding agents. Article 8 of the Personal Income Tax Law stipulates that for personal income tax, the income source shall be the taxpayer, and the unit or individual paying the income shall be the withholding agent. For equity transfer, the assignee is the withholding agent.

5. Tax declaration. Article 35 of the Implementing Regulations stipulates that when withholding agents pay taxable amounts to individuals, they shall withhold taxes in accordance with the provisions of the tax law, pay them on time, and make special records for future reference. At the same time, Article 9 of the Personal Income Tax Law stipulates that the tax withheld by the withholding agent every month shall be paid into the national treasury within the fifteenth day of the following month, and a tax return shall be submitted to the tax authorities.

6. Competent tax authority. Article 3 of Guoshuihan [2009] No. 285 stipulates that the personal tax on income derived from the transfer of equity of individual shareholders shall be the competent tax authority in which the local tax authority where the equity change occurs is located.

7. Tax policies for parity and low price transfers. The second paragraph of Article 4 of Guoshuihan [2009] No. 285 stipulates that if the tax basis for declaration is obviously low (such as parity and low-price transfers) without a valid reason, the competent tax authority may refer to the net assets per share or Verification of the net asset share corresponding to the proportion of equity held by individual shareholders.

(3) Corporate income tax.

Corporate shareholders must declare and pay corporate income tax for the transfer of equity.

1. Revenue. Article 6 (3) of the Enterprise Income Tax Law of the People's Republic of China (hereinafter referred to as the Enterprise Income Tax Law) stipulates that income from the transfer of property is included in the scope of total enterprise income. Article 16 of the Regulations for the Implementation of the Enterprise Income Tax Law of the People's Republic of China stipulates that the income obtained by a company from transferring equity is the income from transferring property.

2. Deduction. According to the provisions of Article 8 of the Enterprise Income Tax Law, the actual and reasonable expenditures incurred by an enterprise related to income, including costs, expenses, taxes, losses and other expenditures, are allowed to be deducted when calculating taxable income. In terms of equity transfer, taxes and fees such as equity tax and stamp duty related to equity transfer can be deducted.

3. Taxable income. The income from the transfer of equity is the income from equity transfer after deducting the costs incurred to obtain the equity. ^[2]