Tax Risk Of Employee Stock Ownership

In 2008, M invested a sum of money in the employee's Liu account and bought the equity of a property company in the name of Liu.

The company put the above expenditure on the company's "other payable" subjects.

They are ordered by the tax authorities to make up the corresponding personal income tax.

The tax official reminds us that employee stock ownership is a product of social history. Enterprises should pay attention to relevant policies and avoid tax risks.

Details of the case

M is a real estate company. In 2008, the company bought shares of a property company under the name of Liu, a company employee.

The real estate will be pferred to the account of Liu's account, and will be held in the company's "other payable" subjects.

After receiving the money, Liu signed a share pfer agreement with the shareholders of the property company and obtained a 80% stake in the property company.

The tax inspection team found the problem and decided that the sum should belong to the loan from the enterprise to the employees, and the time span has exceeded 12 consecutive months. The personal income tax should be paid according to the "wages and salaries" tax items.

The company was ordered to make up the corresponding personal income tax.

Case analysis

M company financial staff explained that employee stock ownership is a product of social history, that is, the actual investor agrees with others, in the name of workers on behalf of the actual investors to perform the rights and obligations of shareholders.

Because the fund workers actually did not get it, the company did not consider it necessary to pay a personal tax, but put the above expenses on other "payable" subjects of the company.

The inspector explained: according to the regulations issued by the General Administration of Taxation, such funds should belong to enterprises' loans to employees, and the time span has exceeded 12 consecutive months, and personal income tax should be paid according to the "wages and salaries" tax items.

The company finally agreed with the inspector's point of view and agreed to make up the corresponding tax.

Legislative basis

Personal income tax law of the People's Republic of China (Order No. eighty-fifth of the president of the People's Republic of China 2007)

Second the following personal income shall be subject to personal income tax:

First,

Salary income;

The eighth personal income tax is based on income.

The units or individuals that pay the proceeds shall be the withholding agents.

...

Official Reply of the Ministry of Finance and the State Administration of Taxation on the issue of personal income tax for individual purchase of housing or other property by an enterprise (Finance and tax [2008]83)

...

(two) enterprise investors, investors, family members or other personnel of the enterprise borrow money from enterprises to purchase houses and other properties, and register their ownership as investors, investors' family members or other personnel of the enterprise, and the loan is not returned after the end of the loan.

Two. The above income obtained from a sole proprietorship enterprise or individual investor or family member of a partnership shall be regarded as an individual investor.

According to the "individual industrial and commercial household's production and business income" project, the personal income tax is collected; the above income obtained by individual investors or members of their family other than individual proprietorship enterprises or partnership enterprises is regarded as the dividend distribution of individual investors, and the personal income tax is calculated according to the items of interest, dividends and bonuses.

Processing result

According to the relevant laws and regulations, the company was ordered to make up the corresponding personal income tax.

Tax official proposal

Employee stock ownership is a product of social history. Enterprises should pay attention to relevant policies and avoid tax risks.