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Tax of the case: How to determine the individual income tax of share swap? What about paying taxes w

2022-11-04

Expert tips for Yijiu




Share for share investment belongs to non monetary assets investment. How to determine the individual income tax? How can we do if we don't get cash and no money to pay taxes? In the case, the taxpayer was investigated and punished for underpaying individual income tax through the investment transaction of exchanging shares for shares





The Notice of the Ministry of Finance and the State Administration of Taxation on Individual Income Tax Policies Related to Personal Investment in Non monetary Assets (CS [2015] No. 41) stipulates that:




If an individual invests in non monetary assets, the income from the transfer of non monetary assets shall be recognized at the assessed fair value. The balance of the income from the transfer of non monetary assets less the original value of the assets and reasonable taxes is the taxable income.




If an individual invests in non monetary assets, he/she shall recognize the realization of the income from the transfer of non monetary assets when the non monetary assets are transferred and the equity of the invested enterprise is obtained.




If the taxpayer has difficulty in paying the tax at one time, it can reasonably determine the installment payment plan and report it to the competent tax authority for filing. After that, the individual income tax shall be paid by installments within 5 calendar years (inclusive) from the date of the occurrence of the above taxable behavior.




If you need to self check tax compliance or solve more difficult tax problems, please contact Yijiu experts for free consultation






Why did the trader break the contract after tax filing?







The case source information shows that after completing a huge equity transaction, Mr. Zhang once filed with the tax authority to pay individual income tax in installments. However, when the filing was due, he did not declare and pay taxes in full as agreed. Why did Mr. Zhang break the agreement? What's the catch?




Recently, the Inspection Bureau of Guangzhou Municipal Taxation Bureau of the State Administration of Taxation checked the case of Zhang's transfer of enterprise equity suspected of underpaying individual income tax according to the source clues handed over by his superiors. The inspectors made a detailed investigation and careful examination. In only one month, they fully grasped all the details of the large equity transaction five years ago, confirmed the fact that Mr. Zhang had underpaid the tax, and finally made a decision to make up the tax and impose a late fee of more than 80 million yuan in accordance with the law, ensuring that the tax on the equity transaction involved would not be lost.




It has been put on record. Why is the tax underpaid




In April this year, the Inspection Bureau of Guangzhou Municipal Taxation Bureau received a suspicious clue from the superior that Zhang, a high-income natural person, was suspected of underpaying personal income tax. The clue shows that Mr. Zhang once transferred his equity in 2016 and transferred his equity of X Company to Y Company, a listed company. At that time, Mr. Zhang filed with the tax authority the personal income tax payment by installments on the income from equity transfer and promised to pay the tax by installments. However, Zhang did not pay the individual income tax as promised after the expiration.




After receiving the clues, the Inspection Bureau of Guangzhou Municipal Taxation Bureau quickly organized the backbone to set up a special team to investigate and judge the relevant situations.




According to the filing information of Mr. Zhang's payment of individual income tax by installments to the Guangzhou tax authority in 2016, the taxable income of Mr. Zhang's transfer of the equity of Company X to Company Y is more than 500 million yuan, and the individual income tax payable is more than 100 million yuan. The plan is to pay the individual income tax by installments within five calendar years, of which the planned payment amount from 2016 to 2019 is zero yuan, and the plan is to pay the tax in full in 2020.




The inspectors found that after the expiration of the tax payment filing in 2020, Mr. Zhang did not declare and pay taxes according to the time agreed in the filing. He began to declare and pay personal income tax to the Guangzhou tax authority on the equity transfer until February of this year, and the tax declared and paid was only more than 50 million yuan, half of the amount of 100 million yuan tax promised to be paid at the time of filing.




Since Mr. Zhang took the initiative to file the individual income tax payment by installments with the tax department after the completion of the equity transfer transaction, it shows that he knows and is willing to bear his own tax obligations, but why did he fail to declare and pay taxes in full and on time after the expiration of the filing?




Retrospective investigation, a complete picture of the transaction




The inspectors decided to check the equity transaction of Mr. Zhang, the source of the case, and lay a foundation for solving the mystery and investigating the case by restoring the process of equity transfer transaction and accurately grasping the details of the transaction.




The source information shows that Mr. Zhang's equity transaction is related to listed company Y. According to the provisions of the CSRC, the relevant information of the equity transfer activities of listed companies with large shares must be disclosed in the company's annual report and other channels, which has facilitated the special case team to investigate and obtain the true situation of Zhang's equity transactions.




After a lot of information sorting and inquiry work, the project team finally found the details of this equity transfer transaction in the massive announcement information: Zhang transferred his equity of X Company to Y Company at a consideration of more than 500 million yuan, which was paid by Y listed company by issuing more than 30 million shares, with a unit price of more than 10 yuan per share. After the completion of the transaction, X Company completed the shareholder change registration procedures, and Zhang obtained more than 30 million new listed shares of Y Company according to the agreement.




The inspectors learned that in this transaction, Mr. Zhang and Company Y also signed a profit forecast compensation agreement. Both parties agreed that Company X should reach the performance target agreed by both parties within 3 years after the transaction, otherwise, Mr. Zhang needs to return some shares of Company Y as performance compensation. During the 3-year performance commitment period, the shares of Company Y acquired by Mr. Zhang are restricted from sale, which will be unlocked according to the realization of the performance commitment of Company X. Therefore, Mr. Zhang cannot sell the shares of Company Y acquired in the stock market immediately after the equity transaction.




After knowing the details of these transactions, we need to confirm the income of Mr. Zhang in this transaction, and the project team also needs to verify the final realization of the performance promised by Mr. Zhang to Company X. As a result, the inspectors continued to check the relevant business information of Company Y in the following three years, and finally found that Company Y disclosed the net profits achieved by Company X during the performance commitment period from 2016 to 2018 in the subsequent special audit report on profitability. These data showed that the performance commitment standard for the equity transaction between Mr. Zhang and Company Y had been achieved - Mr. Zhang did not need to return shares to compensate Company Y.




Through verification of this information, the project team determined that the fact that Mr. Zhang transferred his equity to Company Y in 2016 and earned a total income of more than 500 million yuan was true.

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