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How to recognize the original value of equity when a natural person acquires equity through different ways?
Recently, a proposed listed company was questioned by the Shenzhen Stock Exchange (SZSE) due to the non-payment of individual income tax on the transfer of equity by its executives.2021 On April 29, 2012, the article "Tax Risk Oriented, Precise Implementation of Tax Supervision" made it clear that it is necessary to focus on the investigation of the tax-related violations in the field of transfer of equity by high-income earners. Since then, improper recognition of income and cost by natural persons in the process of equity transfer is very likely to cause tax risks. This article intends to combine a case to clarify how to recognize the original value of equity acquired by natural person shareholders through capital increase, assignment and capitalization.Dec. 27, 2023, 5:33 p.m.
5062Views
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Four cases to analyze the tax risk of shareholders' long-term non-payment of loans from companies
On July 11, 2003, the Ministry of Finance and the State Administration of Taxation (SAT) issued the Circular of the Ministry of Finance and the State Administration of Taxation on Regulating the Administration of Individual Investor's Individual Income Tax Collection (Cai Shui [2003] No. 158), which treats the "long-term non-reimbursement of individual shareholders' loans" as a distribution of dividends and bonuses, and collects individual income tax. Although the document has been in force for more than 20 years, there are still big controversies in the implementation, especially in the scope of the borrower, the judgment of the time of occurrence of the tax obligation, the connection with the system of "no profit, no distribution" of the Company Law, and the question of whether to levy tax or refund the tax for the repayment of the borrowed money across the years, etc., the tax authorities around the world have different understandings. This article is intended to analyze the disputes in the application of Circular 158 in the light of four cases and make suggestions for taxpayers to cope with the relevant risks.Dec. 21, 2023, 3:36 p.m.
3453Views
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Should the conversion of $98 million of individual labor compensation income to business income be characterized as tax evasion?
Recently, a Notice of Tax Administrative Penalty Matters has attracted wide attention, in which a natural person converts the nature of income by setting up a sole proprietorship enterprise, and draws up tax evasion and imposes a fine of 15.91 million yuan. In the past, in the field of network entertainment, there have been many cases of fictitious business, converting income from remuneration for labor services to business income, and converting income from domestic individuals to income from overseas enterprises, and the tax-related risk of converting the nature of income is still high. This article intends to analyze the way of realizing tax benefits and tax-related risks by converting the nature of income in the light of the case, and further put forward the compliance points of avoiding tax burden by adopting such a way.Dec. 7, 2023, 9:02 a.m.
4842Views
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Failure to file tax return for transfer of nominee shares, hidden shareholder ruled to be guilty of tax evasion
Equity holding, also known as entrusted shareholding, anonymous investment or pseudonym, refers to the actual contributor and others agreed to the name of the other person on behalf of the actual contributor to fulfill the rights and obligations of shareholders, a kind of equity or share disposal. Shareholding is a relatively common mode of shareholding in the capital market, but if the "shares held on behalf of" is transferred, the actual shareholders, the nominal shareholders of the "shares held on behalf of" part of the tax payable without tax, the tax obligation and avoidance of payment of taxes. The issue of whether the criminal liability should be borne by the actual shareholders or the nominal shareholders is controversial. In this article, we will start from the case to explore the normative differences among the civil and commercial law, tax law and criminal law in the field of nominee shareholding, and suggest the relevant tax-related risks under the mode of nominee shareholding and provide suggestions to cope with them.Nov. 26, 2023, 9:49 p.m.
3450Views
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Checks on business income from equity investments highlight double taxation of partnership share transfers
On December 30, 2021, the Ministry of Finance (MOF) and the State Administration of Taxation (SAT) issued the Announcement on the Administration of Collection of Individual Income Taxes on Income from Equity Investments and Operations (MOF SAT Announcement 2021 No. 41). In the past, although authorized levies for partnerships were treated as a tax preference in many places, they were essentially a form of levy management and the system was designed, to some extent, to address the inherent problems in the tax system. After the prohibition of authorized levies, the problems caused by the flaws in the tax system have gradually come to the fore, among which the problem of double taxation on the transfer of partnership shares is particularly obvious.Nov. 26, 2023, 8:54 p.m.
3493Views
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Case Study: Can a transfer of a partnership share avoid the 35% tax on an equity partnership's authorized conversion to checking?
Since the Announcement on Administration of Individual Income Tax Collection on Business Income from Equity Investments (Announcement No. 41 of the Ministry of Finance and the State Administration of Taxation of 2021) came into effect, the space of authorized taxation for sole proprietorships and partnerships engaging in equity investments has been blocked, and all kinds of investment enterprises and investment funds under partnership structure have been under the focus of the tax authorities, which has implicated some new types of tax risks. It is understood that when reviewing the tax declaration information of enterprises, the tax authorities of a certain place proposed that the transfer of partnership shares by partners should also be declared for tax payment in accordance with the business income, and a tax rate of 5%-35% should be applied, which triggered a dispute between tax enterprises.Nov. 26, 2023, 3:48 p.m.
4980Views
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Cessation of execution of non-monetary asset investment agreements and unjustified non-refund of overpaid taxes
China's personal tax policy on investment in non-monetary assets has gone through an evolutionary process from "no levy" to "one-time payment" to "payment by installments", and the focus of the policy has also changed from "lack of taxable cash" to "preventing national tax loss" to "guiding private investment". The focus of the policy has also transitioned from "lack of personal taxable cash" to "preventing national tax loss" to "guiding private investment". As the economic activities of individual investors investing in equity, real estate, technical inventions and other forms of non-monetary assets become more and more widespread, coupled with the long process of fulfilling the investment agreement, there are numerous tax disputes on the point of time and standard for recognizing the transfer income. Especially under the current non-monetary assets investment tax policy, individual investors face three major tax risks that need to be prevented.Nov. 26, 2023, 11:29 a.m.
3086Views
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Three Major Tax-Related Risks Facing the Dismantling of Multi-Level Nested Partnership Shareholding Platforms and Five Suggestions for Responding to Them
With the Notice on Administration of Collection of Individual Income Tax on Income from Equity Investments and Operations (Notice No. 41 of 2021 of the Ministry of Finance and the State Administration of Taxation) coming into effect, the tax advantages of holding equity, shares, partnership shares and other equity assets in partnerships are no longer available, and many investors have begun to dismantle their partnership investment structures and return to the original state of direct shareholding by natural persons. However, the dismantling of the investment structure will also result in a high tax burden, and in addition, even if the partnership is canceled, all types of transactions that occurred prior to the cancellation may still be subject to retroactive adjustments. Recently, a local tax bureau made public a case of multi-layer nested partnership write-off and the partners were subjected to retroactive tax payment. This article will analyze the tax risk of dismantling the partnership investment structure in light of this case.Nov. 22, 2023, 9:31 a.m.
4644Views
