First, what is the personal income tax rate for income? Is there a difference between the tax rate applicable to employees holding shares indirectly through the shareholding platform and the tax rate applicable to natural persons holding shares directly in the company?
Second, can the employee stock ownership platform apply the deferred tax policy?
1. There are two kinds of income from employee stock ownership platform-dividend income and equity transfer income.
Dividend income
First of all, the dividend income obtained by resident enterprises investing in resident enterprises belongs to tax-free income. This is a tax characterization of dividend income-dividend is not a kind of operating income, but the income of shareholders after tax payment (except, of course, if the income tax rate applicable to the invested enterprise is lower than that of the invested enterprise). If the resident enterprise pays dividends to the resident enterprise and collects corporate income tax again, it belongs to the repeated collection of corporate income tax for the same operating income. Therefore, personal income tax is required only when dividend income is distributed to natural person shareholders, and the personal income tax rate of dividend income is 20%.
Secondly, since dividends do not belong to the business income of enterprises, but penetrate into the personal income of natural person shareholders, then the dividends obtained by partnership enterprises do not belong to the business income of partnership enterprises, but the personal dividend income of natural person partners, and personal income tax should be paid at the rate of 20% according to the dividend income enjoyed by natural persons.
The legal basis is as follows.
State Taxation Administration of The People's Republic of China's notice on the implementation scope of the Provisions on Individual Income Tax for Investors in Sole proprietorship Enterprises and Partnership Enterprises (Guo Shui Han [2001] No.84) stipulates that:
In order to better implement the spirit of the Notice of the Ministry of Finance and State Taxation Administration of The People's Republic of China on Printing and Distributing the Provisions on Individual Income Tax for Investors in Sole proprietorship Enterprises and Partnership Enterprises (Caishui [2000] No.91) (hereinafter referred to as the Notice), and earnestly do a good job in the collection and management of individual income tax for investors in sole proprietorship enterprises and partnership enterprises, the implementation caliber of the relevant provisions in the Notice is as follows.
Two, on the issue of taxation of interest, dividends and bonuses on foreign investment of sole proprietorship enterprises and partnerships.
The interest, dividends and bonuses returned from the foreign investment of a sole proprietorship enterprise and a partnership enterprise shall not be incorporated into the income of the enterprise, but shall be separately regarded as the income of interest, dividends and bonuses obtained by the individual investor, and personal income tax shall be calculated and paid according to the taxable items of "income from interest, dividends and bonuses".
2. Income from share transfer
Employees directly hold shares in the company, and the personal income tax rate of 20% is applied according to the "income from property transfer" when transferring shares. Then, when the employee stock ownership platform transfers shares, should the progressive tax rate of 5-35% be applied according to the operating income of the partnership or the tax rate of 20% be levied according to the income from property transfer?
Legally speaking, a progressive tax rate of 5-35% is applicable. However, in practice, in the past, many places did tax according to the income from property transfer. Later, the State Administration of Taxation issued a special document to correct the behavior of local governments not taxing according to business income.
20% income tax can be applied only if the registered venture capital partnership enterprise's equity transfer income meets the accounting conditions.
The basis of regulations and policy documents is as follows.
The Notice of State Taxation Administration of The People's Republic of China on Strengthening the Collection and Management of Personal Income Tax for High Income earners (Guo Shui Fa [2011] No.50) stipulates that:
(3) Improve the collection and management of income from production and operation.
2. The income obtained from the trading of shares (tickets), futures, funds, bonds, foreign exchange, precious metals, resource exploitation rights and other investment products by a sole proprietorship enterprise and partnership enterprise shall be fully included in the income from production and operation, and personal income tax shall be levied according to law.
State Taxation Administration of The People's Republic of China Inspection Bureau's Guiding Opinions on the Inspection of Equity Transfer in 20 18 years (No.88 [2018] of the General Tax Collection Letter) stipulates that:
(a) opinions on the distribution of the income from the transfer of shares by the partnership to the natural person partners (limited partners) and the collection of personal income tax.
During the inspection, it was found that some local governments introduced investment-oriented enterprises in order to develop local economy, and stipulated on their own that the natural person partners of investment-oriented partnerships would collect personal income tax according to the items of "income from interest, dividends and bonuses" or "income from property transfer", and the tax rate would be 20%.
According to the current individual income tax law, the investors of a partnership enterprise are taxpayers. The income from the transfer of shares by a partnership enterprise should be taxed first, and the taxable amount of the partnership enterprise investors should be determined according to the total production and operation income of the partnership enterprise and the distribution ratio agreed in the partnership agreement. According to the project of "income from production and operation of individual industrial and commercial households", the excessive progressive tax rate of 5%-35% should be applied. The provisions of the local government violate the provisions of Article 3 of the Tax Administration Law and should be corrected.
The Notice of the Ministry of Finance and the State Administration of Taxation, Development and Reform Commission and CSRC on the Income Tax Policy for Individual Partners of Venture Capital Enterprises (Caishui [2019] No.8) stipulates that:
In order to further support the development of venture capital enterprises (including venture capital funds, hereinafter referred to as venture capital enterprises), the relevant personal income tax policies are hereby notified as follows:
1. A venture capital enterprise may choose to calculate the taxable amount of individual income tax on the income of its individual partners from venture capital enterprises in one of two ways: accounting by a single investment fund or accounting by the overall annual income of venture capital enterprises.
The venture capital enterprises mentioned in this notice refer to partnership venture capital enterprises (funds) that comply with the relevant provisions of the Interim Measures for the Administration of Venture Capital Enterprises (Order No.39 of the Development and Reform Commission, etc. 10 Department) or the Interim Measures for the Supervision and Administration of Private Investment Funds (Order No.0/05 of the CSRC) on venture capital enterprises (funds), and have completed filing and standardized operation in accordance with the above provisions.
Two, venture capital enterprises choose to be accounted for by a single investment fund, and their individual partners shall pay personal income tax at the rate of 20% on the income from equity transfer and dividends from the fund.
If a venture capital enterprise chooses to calculate the annual income as a whole, its individual partners shall calculate and pay individual income tax according to the "operating income" item and the excess progressive tax rate of 5%-35% from the income obtained by the venture capital enterprise.
Three, single investment fund accounting, refers to a single investment fund (including venture capital enterprises not established in the name of the fund) in a tax year from different venture capital projects to obtain equity transfer income and dividend income according to the following methods:
(1) Income from equity transfer. The income from equity transfer of a single investment project shall be calculated according to the balance of the annual equity transfer income after deducting the original value of the corresponding equity and the reasonable expenses of the transfer link. The method for determining the original value of the equity and the reasonable expenses of the transfer link shall be implemented with reference to the relevant policies and regulations on individual income tax on equity transfer income; The income from equity transfer of a single investment fund shall be calculated according to the balance of the income and losses of different investment projects in a tax year. If the balance is greater than or equal to zero, it shall be recognized as the annual equity transfer income of the fund; If the balance is less than zero, the annual equity transfer income of the fund is calculated at zero and cannot be carried forward across the year.
4. Overall accounting of annual income of venture capital enterprises refers to calculating the income that should be distributed to individual partners after deducting costs, expenses and losses from the total income of venture capital enterprises in each tax year. If the conditions stipulated in the Notice of the Ministry of Finance and the State Administration of Taxation on Tax Policies for Venture Capital Enterprises and Angel Investment Individuals (Cai Shui [2018] No.55) are met, the individual partners of venture capital enterprises can deduct their share of business income from venture capital enterprises according to 70% of the investment corresponding to the transferred project, and then calculate their tax payable. Annual accounting losses, according to the relevant provisions of the allowed to carry forward to future years.
Individual partners who are taxed according to the "operating income" project, if they have no comprehensive income, can deduct the basic deduction, special deduction, special additional deduction and other deductions determined by the State Council according to law. Where business income is obtained from multiple sources, the individual income tax shall be calculated in summary, and the above expenses and deductions shall be deducted only once.
2. Can the shareholding platform handle deferred tax filing?
The Notice on Perfecting the Income Tax Policies for Equity Incentives and Technology Shares (Caishui [2016]10/) stipulates that:
I. Deferred tax policy shall be implemented for stock options, stock options, restricted stocks and stock awards of eligible unlisted companies.
(1) If the stock options, stock options, restricted stocks and equity awards granted by non-listed companies to employees of the company meet the prescribed conditions, the deferred tax policy can be implemented after filing with the competent tax authorities, that is, employees can temporarily not pay taxes when they obtain equity incentives, and postpone paying taxes until the transfer of the equity; At the time of equity transfer, the "income from property transfer" item shall be applied according to the difference of equity transfer income after deducting the cost of equity acquisition and reasonable taxes, and personal income tax shall be calculated and paid at the tax rate of 20%.
When transferring equity, the acquisition cost of stock (option) is determined according to the exercise price, the acquisition cost of restricted stock is determined according to the actual capital contribution, and the acquisition cost of equity incentive is zero.
(2) Equity incentives (including stock options, stock options, restricted stocks and equity incentives, the same below) of unlisted companies enjoying deferred tax policy shall meet the following conditions:
1. It belongs to the equity incentive plan of domestic resident enterprises.
2. The equity incentive plan was reviewed and approved by the company's board of directors and shareholders' (general) meeting. State-owned units without a shareholders' (general) meeting shall be examined and approved by the higher authorities. The equity incentive plan shall specify the incentive purpose, object, target, validity period, methods for determining various prices, conditions and procedures for the incentive object to obtain rights and interests, etc.
3. The incentive target shall be the equity of the Company of a domestic resident enterprise. The target of the equity award can be the equity obtained by the investment of technological achievements in other domestic resident enterprises. The stock (right) of the incentive target includes the stock (right) granted to the incentive target through additional issuance, direct transfer by major shareholders and other reasonable ways permitted by laws and regulations.
4. The incentive targets shall be the technical backbones and senior managers decided by the board of directors or shareholders' (general) meeting of the company, and the cumulative number of incentive targets shall not exceed 30% of the average number of employees of the company in the last six months.
5. The stock (option) shall be held for 3 years from the date of grant and for 1 year from the date of exercise; Restricted shares shall be held for 3 years from the date of grant and for 1 year after lifting the ban; The equity award shall be held for 3 years from the date of receiving the award. The above time conditions shall be specified in the equity incentive plan.
6. The time from the grant date to the exercise date of stock (option) shall not exceed 10 years.
7. The companies that implement equity awards and the industries to which the companies that reward equity targets belong are not within the scope of the Catalogue of Restricted Industries with Preferential Tax Policies for Equity Awards (see Annex). The company's industry is determined according to the industry with the highest proportion of the company's main business income in the previous tax year.
Obviously, judging from the essence, the equity incentive method of employee stock ownership platform conforms to the above provisions-employees get the partnership share of the stock ownership platform, and the main property or even almost the only property of the stock ownership platform is the company shares held by employees to carry out equity incentive. In essence, the purpose of employees getting the partnership share is to obtain the company shares.
In fact, when employees get equity incentives, they usually stipulate the lock-up period or future service life requirements, that is, the shares cannot be realized immediately, and the actual income has not yet been generated. The future realized value of the shares is uncertain, that is, the employees have not actually obtained the income at the current time, and there is no need to pay personal income tax without the income. Only when the shares are realized will the obligation to pay personal income tax occur.
Therefore, the shareholding platform can also handle deferred tax filing.
Moreover, many cases show that the equity incentive in the form of shareholding platform can also use the above-mentioned documents to handle the deferred tax filing of personal income tax.
Holding a platform for deferred tax filing does not mean that the tax rate of 20% of "income from property transfer" can be applied. As mentioned above, it is taxed according to business income.
Case: 300985 Zhiyuan Xinneng IPO and listing on GEM prospectus.
On September 25th, 20 19, the investors decided that Changchun Huifeng, a shareholder, would transfer his shares in the company to Wang Ran at the price of RMB, Changchun Huifeng would transfer his shares in the company to Zhongzhi Huiyuan at the price of RMB, and Changchun Huifeng would transfer his shares in the company to Wu Weigang at the price of RMB 10,000. On the same day, Changchun Huifeng signed the Equity Transfer Agreement with Wang Ran, Zhongzhi Huiyuan and Wu Weigang respectively.
In order to ensure the sustained and stable development of the company, the issuer considers binding with the personal interests of the core employees, sharing the growth value of the company, and decides to grant shares to the core employees of the company. Unity of will is the shareholding platform of the core employees of the company. The transfer of equity to Zhongzhi Huiyuan at the nominal price of 1 yuan is an equity incentive made by the issuer in consideration of the position of the transferee's investor and the degree of contribution to the company, and the issuer has confirmed the share payment and included it in the management fee at one time.
Wu Weigang is a friend of Bird, the issuer's actual controller, for many years. He has a better understanding of Zhiyuan Equipment's business. In order to be optimistic about the development prospect of Zhiyuan Equipment, he has discussed related investment matters since 20 18. With reference to 20 181February 3 1 day, the owner's equity of the parent company was190,000 yuan. After friendly negotiation, Changchun Huifeng transferred the equity of Zhiyuan Equipment to Wu Weigang for 6 million yuan (corresponding to the registered capital of 10,000 yuan, and the total registered capital of Zhiyuan Equipment at the time of the transaction was 80,000 yuan).
The audited net profit of the company in 20 18 is 40,000 yuan, and the 3% equity of the issuer transferred by Wu Weigang is PE multiple of the net profit in 20 18. This transaction is the true intention of both parties, and the pricing is fair. This transaction is Wu Weigang's personal real investment behavior, and there is no stock holding behavior.
According to the Notice of State Taxation Administration of The People's Republic of China, Ministry of Finance on Perfecting Income Tax Policies on Equity Incentive and Technology Participation (Caishui [2016]10/No.), stock options, stock options, restricted stocks and equity incentives granted by non-listed companies to employees of the company can be subject to deferred tax policy after filing with the competent tax authorities, that is. On March 12, 2020, the issuer filed the deferred tax payment of personal income tax for the relevant incentive objects with respect to the above-mentioned equity incentives, and obtained the "Deferred Tax Payment Filing Form for Personal Income Tax of Non-listed Companies" issued by Chaoyang District Taxation Bureau of Changchun City, State Taxation Administration of The People's Republic of China, confirming that the relevant personnel may not pay taxes temporarily.
Changchun Huifeng has summarized the income from the above equity transfer and paid enterprise income tax in its income tax declaration.
To sum up, the parties involved in the equity transfer have fulfilled their tax obligations in a timely manner or made deferred tax filing, and there is no tax risk in these equity transfers.