J & T Capital Watch... Foreign natural person shareholders to explore the issue of dividend tax.
Published:
2022-06-01
At present, with the increasingly strict requirements of IPO audit, the issue of tax payment has been paid more and more attention. In practice, there are situations where the issuer's shareholders are foreign natural persons or where the actual controller is a foreign natural person after penetration verification. This paper intends to start from the issue of paying dividends to foreign natural person shareholders, with a view to discussing with you. 1. related regulations According to the Notice of the Ministry of Finance and the State Administration of Taxation on Certain Policy Issues Concerning Individual Income Tax jointly issued by the Ministry of Finance and the State Administration of Taxation in 1994 (Cai Shui Zi [1994] No. 20): "... 2. the following income shall be temporarily exempted from individual income tax: (viii) Income from dividends and bonuses received by foreign individuals from foreign-invested enterprises." And according to the "Announcement of the Ministry of Finance and the State Administration of Taxation on the Continued Effective Individual Income Tax Preferential Policy Catalogue" (No. 177 of 2018) jointly issued by the Ministry of Finance and the State Administration of Taxation in 2018: "The catalogue of documents involved in the continued effective individual income tax preferential policy includes:... Notice of the Ministry of Finance and the State Administration of Taxation on Certain Policy Issues Concerning Individual Income Tax" (Caishuizi [1994] No. 20)... ". However, in 2013, the State Council issued the "Notice of the State Council on Approving and Transforming the Opinions of the Development and Reform Commission and Other Departments on Deepening the Reform of the Income Distribution System" (Guo Fa [2013] No. 6), which stated: "14. Strengthen the adjustment of personal income tax. Accelerate the establishment of a comprehensive and classified personal income tax system. We will improve the collection, management and punishment measures of personal income tax for high-income earners, bring all kinds of income into the scope of collection, establish and improve the two-way declaration system of personal income and the national unified taxpayer identification number system, and collect all receivables in accordance with the law. Abolish tax incentives such as exemption from personal income tax on dividends and bonus income received by foreign individuals from foreign-invested enterprises." However, since the State Administration of Taxation has not officially issued a document to cancel this tax preference, from the practical point of view of tax collection and management, different regions have different ways of interpreting and implementing the policy. For example, the tax authorities in Shanghai, Fujian, Hubei and other regions, in accordance with the State Council [2013] No. 6, cancel the foreign individuals from foreign-invested enterprises to obtain dividends, dividends income exemption from personal income tax and other tax incentives. However, the tax authorities in Guangdong, Ningbo and Anhui believe that Caishuizi [1994] No. 20 is still valid, and the dividends and bonus income obtained by foreign individuals from foreign-invested enterprises are temporarily exempted from personal income tax. Examples of 2. practical operations In the process of Yingke Xinchuang (Xiamen) Technology Co., Ltd. applying for listing on the Growth Enterprise Market, Shenzhen Stock Exchange issued an examination letter [2021) No. 010929 "examination and inquiry letter on the application documents for initial public offering and listing on the Growth Enterprise Market of Yingke Xinchuang (Xiamen) Technology Co., Ltd.", in which question 22. Regarding dividend distribution, it is stated that the issuer is requested to explain the compliance of previous dividend taxation. The issuer's sponsor issued a response report to the audit inquiry letter, responded to the aforementioned questions and explained the exemption of the foreign natural person shareholder LIANG CHEN from personal income tax as follows: "Note 2: according to the Notice of the Ministry of Finance and the State Administration of Taxation on Several Policy Issues of Individual Income Tax (Caishuizi [1994) No. 20) and the Announcement of the Ministry of Finance and the State Administration of Taxation No. 177 of 2018 on the Continued Effective List of Individual Income Tax Preferential Policies" Announcement "and other relevant regulations, dividends and bonus income received by foreign individuals from foreign-invested enterprises are temporarily exempted from individual income tax; therefore, LIANG CHEN as a foreign natural person in the company to obtain dividends can be exempted from personal income tax." At this time, the intermediary agency adopts the provisions of Caishuizi [1994] No. 20, and foreign natural person shareholders are exempt from paying personal income tax. To sum up, in the IPO process, if you are involved in the issue of paying dividends to foreign natural person shareholders, you should not only fully search the relevant regulations of our country, pay attention to the validity period of the regulations, but also focus on the different tax laws of local tax bureaus. Interpretation and corresponding implementation.
At present, with the increasingly strict requirements of IPO audit, the issue of tax payment has been paid more and more attention. In practice, there are situations where the issuer's shareholders are foreign natural persons or where the actual controller is a foreign natural person after penetration verification. This paper intends to start from the issue of paying dividends to foreign natural person shareholders, with a view to discussing with you.
1. related regulations
According to the Notice of the Ministry of Finance and the State Administration of Taxation on Certain Policy Issues Concerning Individual Income Tax jointly issued by the Ministry of Finance and the State Administration of Taxation in 1994 (Cai Shui Zi [1994] No. 20): "... 2. the following income shall be temporarily exempted from individual income tax: (viii) Income from dividends and bonuses received by foreign individuals from foreign-invested enterprises." And according to the "Announcement of the Ministry of Finance and the State Administration of Taxation on the Continued Effective Individual Income Tax Preferential Policy Catalogue" (No. 177 of 2018) jointly issued by the Ministry of Finance and the State Administration of Taxation in 2018: "The catalogue of documents involved in the continued effective individual income tax preferential policy includes:... Notice of the Ministry of Finance and the State Administration of Taxation on Certain Policy Issues Concerning Individual Income Tax" (Caishuizi [1994] No. 20)... ".
However, in 2013, the State Council issued the "Notice of the State Council on Approving and Transmit Several Opinions of the Development and Reform Commission and Other Departments on Deepening the Reform of the Income Distribution System" (Guo Fa [2013] No. 6), which stated: "14. Strengthen the adjustment of personal income tax. Accelerate the establishment of a comprehensive and classified personal income tax system. We will improve the collection, management and punishment measures of personal income tax for high-income earners, bring all kinds of income into the scope of collection, establish and improve the two-way declaration system of personal income and the national unified taxpayer identification number system, and collect all receivables in accordance with the law.Abolish tax incentives such as exemption from personal income tax on dividends and bonus income received by foreign individuals from foreign-invested enterprises."
However, since the State Administration of Taxation has not officially issued a document to cancel this tax preference, from the practical point of view of tax collection and management, different regions have different ways of interpreting and implementing the policy. For example, the tax authorities in Shanghai, Fujian, Hubei and other regions, in accordance with the State Council [2013] No. 6, cancel the foreign individuals from foreign-invested enterprises to obtain dividends, dividends income exemption from personal income tax and other tax incentives. However, the tax authorities in Guangdong, Ningbo and Anhui believe that Caishuizi [1994] No. 20 is still valid, and the dividends and bonus income obtained by foreign individuals from foreign-invested enterprises are temporarily exempted from personal income tax.
Examples of 2. practical operations
In the process of Yingke Xinchuang (Xiamen) Technology Co., Ltd. applying for listing on the Growth Enterprise Market, Shenzhen Stock Exchange issued an examination letter [2021) No. 010929 "examination and inquiry letter on the application documents for initial public offering and listing on the Growth Enterprise Market of Yingke Xinchuang (Xiamen) Technology Co., Ltd.", in which question 22. Regarding dividend distribution, it is stated that the issuer is requested to explain the compliance of previous dividend taxation. The issuer's sponsor issued a response report to the audit inquiry letter, responded to the aforementioned questions and explained the exemption of the foreign natural person shareholder LIANG CHEN from personal income tax as follows: "Note 2: according to the Notice of the Ministry of Finance and the State Administration of Taxation on Several Policy Issues of Individual Income Tax (Caishuizi [1994) No. 20) and the Announcement of the Ministry of Finance and the State Administration of Taxation No. 177 of 2018 on the Continued Effective List of Individual Income Tax Preferential Policies" Announcement "and other relevant regulations, dividends and bonus income received by foreign individuals from foreign-invested enterprises are temporarily exempted from individual income tax; therefore, LIANG CHEN as a foreign natural person in the company to obtain dividends can be exempted from personal income tax."
At this time, the intermediary agency adopts the provisions of Caishuizi [1994] No. 20, and foreign natural person shareholders are exempt from paying personal income tax.
To sum up, in the IPO process, if you are involved in the issue of paying dividends to foreign natural person shareholders, you should not only fully search the relevant regulations of our country, pay attention to the validity period of the regulations, but also focus on the different tax laws of local tax bureaus. Interpretation and corresponding implementation.
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