Tax Incentives: Further Encourage And Guide Private Investment

The Ministry of Finance and the State Administration of Taxation issued a notice today, which will be approved by the State Council.

The policy of phased tax payment for personal non monetary assets in the pilot area of free trade has been extended to the whole country, so as to further encourage and guide the people.

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It is understood that non monetary assets refer to assets other than monetary assets such as cash and bank deposits, including equity, real estate, technological invention, and other forms of non monetary assets.

The notice issued by the two sector clearly stipulates that individuals should declare tax to the competent tax authorities within 15 days of the occurrence of taxable activities.

If a taxpayer has difficulty in paying tax at a time, he may reasonably determine the installment payment plan and report it to the competent tax authority for record. He shall pay instalments within 5 calendar days from the date of the above taxable act.

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The two part of the circular requires that the cash part of a person who obtains the cash supplement in the process of non monetary assets investment paction shall be given priority in paying taxes, and that part of the cash which is not enough to pay can be paid in installments.

If an individual pfers all or part of his shares held during the period of tax payment and obtains cash income, the cash income shall be given priority to paying the tax that has not been paid.

According to regulations, individuals who invest in non monetary assets belong to individuals who pfer non monetary assets and investment simultaneously.

The pfer of non monetary assets by individuals shall be calculated according to the item of "pfer of property" according to the law.

Individuals who invest in non monetary assets should confirm the income of non monetary assets pfer according to the fair value after assessment.

The amount of taxable income is the balance of non monetary assets pfer income minus the original value of assets and reasonable taxes and fees.

However, after the investment of non monetary assets, the individual has not paid cash income even though it has pferred the non monetary assets. At this time, it is necessary to pay personal income tax at once, and the pressure of cash flow is very large for many individual investors.

In view of the above problems, in the general plan of China (Shanghai) free trade pilot area, it is stipulated that "the value added assets of enterprises or individual shareholders registered in the pilot area shall be paid in installments within the period of not exceeding 5 years" as a result of assets reorganization arising from the reorganization of assets such as non monetary assets and overseas investment.

In February 25th, a State Council executive meeting was held to determine measures to further reduce taxes and reduce fees, and to support the development and innovation of small and micro enterprises. One of them was the actual income from the non monetary assets such as equity, real estate and technological inventions, which had been piloted by the pilot since April 1, 2015.