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The State Administration of Taxation has issued the “Administrative Measures for Personal Income Tax

Date:2020-05-11 17:08:55

On December 7, 2014 the State Administration of Taxation issued the” Administrative Measures for Personal Income Tax on Income from Equity Transfers (for Trial Implementation)” (hereinafter: “Administrative Measures”) , which will come into force on January 1, 2015. The main content of the Administrative Measures is as follow:

(1)    The definition of equity transfer;

(2)    The recognition of income from equity transfers;

(3)    The verification of equity transfer income;

(4)    Recognition of the original value of the equity;

(5)    The subjects of and procedure for tax declaration.

When the Administrative Measures go into effect, the “Circular of the State Administration of Taxation on Enhancing the Administration of the Imposition of Personal Income Tax on Equity Transfer” (Guo Shui Han [2009] No.285) and the “Announcement of the State Administration of Taxation on Issues concerning the Verification of the Taxation Basis of Personal Income Tax on Equity Transfer” (Announcement of the State Administration of Taxation [2010] No.27) will automatically expire.

As the domestic capital market becomes increasingly active and the forms equity transfer increasingly diverse, the current rules are difficult to apply in practice. Tax collectors and taxpayers are unable to reach agreements with respect to equity transfers. The introduction of the Administrative Measures will enhance flexibility and predictability with respect to tax payments on equity transfers, lower both the taxpayers‘ taxation risk and tax authorities’ administration enforcement risk. This will provide a sound environment for the smooth operating and the healthy development of equity investments.
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