The New Regulations Issued Jointly By The Ministry Of Finance And The State Administration Of Taxation Are Aimed At Reducing Taxes.

In September 22nd, the Ministry of Finance and the State Administration of Taxation jointly issued the notice on improving the income tax policy of equity incentive and technology equity participation.

What is the adjustment of the equity incentive tax policy? What impact will it bring to the taxpayer? What are the conditions for the enterprise to enjoy the new policy? Combined with the hot issues, the Economic Daily reporters interviewed the two departments concerned.

It is understood that the equity incentive of Chinese enterprises began in 1990s, and it really started after the split share structure reform in 2005.

Management measures for equity incentive of Listed Companies in 2005 (Trial Implementation) and 2014

The implementation of the pilot guidance on employee stock ownership plan has promoted the rapid development of equity incentive system.

With the rising trend of mass entrepreneurship and innovation, the pformation of scientific and technological achievements has become increasingly active, and related tax policies such as equity incentives have increasingly become the focus of social attention.

Some non-listed company have implemented equity incentive in comparison with listed companies in order to attract talents.

"Compared with the listed companies, the liquidity of non-listed company is weak, and the future development of the company is uncertain. They hope to give further tax incentives, including adjusting the tax point of equity incentive and reducing the applicable tax rate."

The two department responsible person said that in order to promote the implementation of the national entrepreneurship and innovation strategy and maximize the pformation of scientific and technological achievements into real productive forces, the existing equity incentive tax policy has been adjusted and perfected.

According to the notice, on the one hand, equity incentive can be divided into two categories: tax preference and tax preference. Under the premise of strict restrictions, deferred tax preferential policies for eligible non-listed company equity incentives will be implemented. On the other hand, the scope of existing preferential policies should be expanded to expand to other market participants, including universities, scientific research institutions and high-tech enterprises. The equity incentive mode offered by preferential policies should also be extended from the current equity awards to other options such as stock option, restricted stock and so on.

In addition, in terms of preferential ways, the deferred tax policy should be applied to eligible equity incentives, while the applicable tax rate should be lowered.

"The implementation of the equity incentive plan for enterprises to enjoy tax preferences shall be filed with the competent tax authorities, and no preferential treatment shall be granted without filing."

The two department leader said.

In addition, department collaboration should also be strengthened. The business sector and tax authorities will share data on equity change registration, and the tax department will do a good job in collecting taxes.

After adjustment, equity incentive

What is the change? The two Department official said that before the adjustment, employees should be given stock rights options, restricted stock and equity awards, etc. employees should be taxed in accordance with the "wage and salary income" items in accordance with the "wage and salary income" items, and apply the 7 to progressive tax rate of 3% to 45%. After the pfer of the proceeds from the shares to employees, the value added proceeds will be levied at the 20% tax rate according to the item of "pfer of property".

In regard to whether or not to affect taxpayers' tax burden, the two Department official said that in order to lighten the tax burden of the equity incentive recipients and solve the problem of insufficient cash flow in the current period, the adjustment of the policy has two considerations: first, the non-listed company's eligible stock rights options, restricted stock and equity awards are taxed according to the two tache of "income from wages and salaries" and "pfer of property". The tax is only taxed in one link, that is, taxpayers do not levy taxes on the exercise of stock rights, restricted stock and the award of equity awards.

Second, the 20% tax rate applies to the one-off tax in the pfer link, which is 10 to 20 percentage points lower than the original tax burden and effectively reduces the taxpayer's tax burden.

This has also been adjusted for the tax policy of investing in stocks for technological achievements.

Enterprises or individuals who invest in stocks with technical achievements should pay income tax on the value added part and allow taxable tax in 5 years.

"On the basis of current policies, we should increase

Policy options.

The two person in charge said that if an enterprise or an individual chooses to invest his shares in a policy of deferred tax, he may, after filing a record with the competent tax authority, temporarily pay no tax on his investment in the stock market. If he is allowed to deferral to the pfer of shares, the income tax shall be calculated according to the difference between the pfer proceeds of the shares and the difference between the original value of the technical results and the reasonable taxes and fees.

Expert analysis said that this will significantly reduce the tax burden of investment in enterprises and personal technology achievements, and actively promote the pformation of scientific and technological achievements.

From the practice of developed countries such as Europe and the United States, we have set strict conditions for stock option incentives that enjoy deferred tax preferences. The purpose is to regulate equity incentive behavior, encourage long-term investment and prevent tax evasion.

"Drawing lessons from international experience, the tax policy introduced has seven restrictions on the equity incentive to enjoy deferred tax preferences.

For example, the provision of preferential tax policies should be the implementation of equity incentive plans by domestic resident enterprises. In order to embody the compliance of the equity incentive plan and avoid the black box operation of enterprises, the equity incentive plan must be considered and approved by the board of directors and shareholders of the company.

The two department leader said.

There are restrictions on the scope of incentives.

"In order to embody the support of enterprises for innovation and entrepreneurship, and avoid enterprises turning equity incentive into general employee benefits, it is stipulated that the incentive target should be the technical backbone and senior management personnel of the enterprise, and the specific personnel shall be decided by the board of directors or the shareholders of the company."

The head of the two department said that the total number of incentives should not exceed 30% of the average number of employees in the last 6 months.

In addition, taking into account the way of equity incentive is more flexible, in order to avoid corporate tax avoidance, the scope of the implementation of equity awards industry also be appropriately limited.

For example, by adopting the counter enumeration method, through the negative list method, it can restrict the industries and enterprises that are obviously not belong to science and technology, such as accommodation, catering, real estate, etc., and limit the tax preferential policies to enjoy the equity incentives. The enterprises with the exception of the negative list can enjoy the preferential tax payment policy.

"In accordance with the current provisions, the preferential policies for individual income tax have been imposed on the shares of listed companies acquired by individuals from the two tier market, the proceeds from the pfer of shares, and the dividends received from holding shares for more than 1 years.

At the same time, taking into account the strong liquidity and quick realization of the shares of listed companies, we should calculate the taxable amount on the basis of the "wages and Salaries Income" items when the stock options are exercised, the restricted shares are lifted and the shares are awarded.

The head of the two department said that considering the relevant laws of the company law and other related laws, there is a time limit for the executives of Listed Companies in the pfer of shares of the company. In order to solve the difficulties in the timing of tax payment for equity incentive objects of listed companies, the policy adjustment further extended the tax payment period for the equity incentive of the listed companies, and extended from the current 6 months to 12 months.