Partnership " First Divided Tax " Easily Misunderstood Big Misunderstanding.

If we talk about how to divide the tax first, I am afraid few people will be able to talk about it, or even misunderstand it.

Now let's start with what happens between a legal partner and a partnership, so that you can really understand the rules of handling.

Question 1: is it true or not that income is recognized?

Someone said that the confirmation time of dividend dividends is determined by the time of making dividend decisions. Therefore, when the partnership is divided into cash, I will confirm the income. LP (limited partner) is incorporated into the taxable income of the year, accounting for taxable income.

As mentioned above, if not, the points here are "points" to see the regulations.

Finance and tax [2008]195 stipulates that the partnership's production and business income and other income shall be "first divided and then tax".

The income from production and operation and other income, including the income distributed by partnership enterprises to all partners and the retained earnings (profits) of the enterprise.

Partners of a partnership shall determine the amount of taxable income according to the following principles: (1) the partners of the partnership shall determine the taxable income according to the proportion of the partnership agreement stipulated in the partnership agreement.

(two) if the partnership agreement has not been agreed or not specified, the taxable income shall be determined according to the proportion of distribution decided by the partners in all production and business income and other income.

(three) if negotiations fail, the taxable income shall be determined according to the proportion of the paid capital contribution of the partners by the proceeds from the whole production and operation and other income.

(four) if the proportion of the capital contribution can not be determined, the income of each partner shall be calculated on the basis of the total production and business income and other income according to the number of partners.

A partnership agreement shall not stipulate that all profits shall be allocated to some partners.

Question two: it is not the profits on account, but the taxable income of partnership enterprises.

The partnership is divided into not the profits on the account, but the taxable income. The taxable income is calculated through deduction of the quota. The personal income tax is relatively clear. The legal partner should also calculate the taxable income that should be allocated, and then directly merge into the taxable income tax of the income tax of the legal partner.

In this way, some companies may not make a confirmed income when the partnership is not allocated. It is necessary to make a tax increase. If the account is allocated, if it is accounted for in the accounts, it may be necessary to make tax reduction after the year.

Therefore, this is different from the dividend income distribution between the enterprises of the residents' income tax.

Some comrades have said that my partnership is profitable, and if there is no profit, it is a loss (calculated taxable income), which was not allocated in that year, because the loss of partnership enterprises can not be made up by the partner enterprises. But if a year is positive, the tax is paid, and the next year it will lose again. It can not be made up. It can only be made up of the taxable income of the partnership enterprise (5 years).

Of course, there is also the problem of penetration of dividends and duty-free dividends in partnership enterprises, that is, dividend dividends obtained by partnership enterprises, and whether the tax exemption can be enjoyed when giving legal person partners.

It should not be accounted for only "unfairly" in the tax law.

In order to clarify the misunderstanding of the market on the income tax policy of the state partnership, Wei Zhimei, head of the research group of the Taxation Research Institute of the State Administration of Taxation and the key topic of the State Administration of Taxation, "the research on the income tax system of partnership enterprise", published the article "understanding the partnership tax policy of the state" in June in the magazine "investment and cooperation".

In view of the detailed background and significance of the relevant national partnership tax policy, it helps the PE community to understand its national policies.

A partnership does not have to pay tax, or does it need to be paid by partners? In China, the market generally believes that if it is a corporate enterprise, it must pay taxes; if it is a partnership enterprise, it is not necessary to pay taxes.

In fact, this is a fundamental misunderstanding of the tax system of partnership enterprises. It is precisely this misunderstanding that leads to other misunderstandings.

From the perspective of fair tax burden and avoidance of tax evasion, most countries adopt the following three different modes of partnership tax system according to the actual characteristics of partnership enterprises:

(1) the non entity tax mode that does not regard partnership as the subject of taxation is mainly prevalent in countries where partnerships have not yet evolved into independent entities.

(2) the entity tax mode which regards partnership as an independent tax entity is mainly prevalent in the countries where the partnership has evolved into an independent entity.

(3) the quasi entity tax mode between the entity mode and the non entity mode. Although this mode does not regard partnership as the subject of tax payment, it needs to make unified income and cost accounting in the links of partnership enterprises, and the taxable income must be paid separately by partners.

In the "partnership law" promulgated in 1997, it is clear that partnership is no longer a mere "partnership", but rather a quasi legal entity with relatively independent property rights.

Therefore, Article 91 requires a quasi entity tax mode for partnership enterprises.

It stipulates explicitly that a partnership should be a tax paying partner with each partner; the partnership shall deduct the total cost of each tax year, deduct the cost, expenses and the balance after the loss as the investor's personal production and business income; and the income from production and operation shall include the income allocated by the enterprise to the investor and the retained earnings (profits) of the enterprise.

In this way, even if the partnership fails to allocate profits, partners should pay taxes to avoid the partnership itself as a tax avoidance tool.

After the revision of the partnership law of 2006, a partnership can adopt a new partnership form with limited partnership, which is more related to the company's related system.

In accordance with the practice of France and Germany, which belong to the continental law system, the limited partnership is a new partnership with limited liability mechanism. It is reasonable to adopt the entity tax mode and treat it directly as the subject of tax payment.

However, when formulating Article 159, the state finance and taxation departments continue to adopt quasi entity tax mode on the one hand, and do not treat it as the main body of tax payment. On the other hand, in order to prevent it from becoming a tax avoidance tool, it reiterates a series of requirements that must be regarded as the main body of taxable income accounting.

Civilization No. 159: partnership business income and other income take the principle of "first after tax". The calculation of specific taxable income is carried out in accordance with the relevant provisions of Article 91, and the "income from production and operation" and "other income" include the income that partnership enterprises assign to all partners, including the retained earnings (profits) of enterprises.

At the same time, it is also clear that partners are legal persons and other organizations. When calculating their payment of enterprise income tax, they should not use the losses of partnership enterprises to offset their profits.

Since our country adopts quasi entity tax mode for partnership enterprises, it is only natural that it should be understood as "

Although it is not the main body of tax payment, it must first calculate the taxable income in the partnership section, and then the partners shall pay the tax separately according to the share of the taxable income. "

However, under the general misconception that "partnership enterprises do not need to pay taxes", many market organizations have declared to investors that investing in partnership funds is not only necessary to pay taxes on fund links; investors can also write off losses with various account losses when funds are allocated to investors, so there is no need to pay taxes in investors' links.

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As mentioned above, according to the quasi entity tax mode, although the partnership is not the subject of tax payment, it must be the subject of the taxable income accounting. After calculating the taxable income, the partnership will assign the "tax base" to the partners, and then the partners will pay taxes for them.

Article 159 clearly stipulates that the partnership's production and business income and other income shall be subject to the principle of "first and then after taxes"; the so-called income from production and operation and other income, including the income distributed by partnership enterprises to all partners and the retained earnings (profits) of the enterprise, that is, the partnership's business income and other income, shall be levied on the partners regardless of whether they are allocated to the partners.

Therefore, our country's "first and then tax" for partnership is not "revenue" but "tax base".

According to the principle of "tax base", partners need to pay taxes for partnership only if they have taxable income in the links of partnership.

Otherwise, if the partnership does not keep the annual income retained in the partnership business, the state will never receive tax.

However, many people in China, based on the understanding of "no taxation of partnership", assume that the state's principle of "first and then after tax" for partnership is supposed to "distribute profits to partners before they need to pay taxes by partners".

Many local taxation departments even have special policies. Only when a partnership actually distributs cash to partners, it will need to be paid by partners if there is a surplus after deducting costs and losses.

In accordance with this tax policy, partners can always evade taxes if they retain their annual earnings in the partnership.

According to Article 159, the calculation of taxable income of all types of partnership enterprises should be carried out in accordance with Article 91 of 2000. According to the taxable income calculated in Document No. 91, for natural partners, whether they are general partners or limited partners, they should apply the excess progressive tax rate of 5%-35% according to the "business income of individual industrial and commercial households" stipulated in the personal income tax law.

China does not levy "capital gains tax" alone. It must pay comprehensive taxes in accordance with the general income derived from individual income tax.

According to the "personal income tax law", our country mainly applies two types of basic tax rates to all kinds of personal income.

(1) for the "wage income", because it is a recurrent income and has a large correlation with personal wealth, it needs to consider the role of tax revenue in regulating income. Therefore, a comprehensive tax mode should be adopted to deduct the progressive tax rate of 3% to 45% after deducting the basic living cost of 42 thousand yuan / year (2011/7/29 tax [2011]62 number: RMB3500X12 months).

(2) due to the contingency of remuneration, labor, dividends, dividends, property pfer, incidental income and other income, it is difficult to deduct all kinds of costs and losses of individuals engaged in such activities, and it is even harder to consider the cost of living for individuals and families. Therefore, only one income has to be paid once, the tax base is relatively high, and the tax rate is naturally low.

Since these incidental income and similar incidental income are not necessarily related to personal wealth, it is difficult to consider the role of tax revenue in income adjustment if taxpaying is adopted. Therefore, a single proportional tax rate of 20%. is applicable.

In addition to the above two basic tax rates, the special "individual" of individual industrial and commercial households, because it is already a relatively independent industrial and commercial entity, can make comprehensive tax payment in terms of the total income of each tax year minus the cost, expenses and losses. Therefore, from the point of view of the principle of tax law, it can refer to the overseas progressive tax mode and directly apply the excess progressive tax rate of wage income.

However, from the perspective of encouraging reemployment of laid-off workers, China has set up a preferential progressive progressive tax rate with relatively low tax rates for the "business income of individual industrial and commercial households".

For 5 to 35%., for the later partnership enterprises, the state finance and taxation department also adopted the practice of "income from individual industrial and commercial households" when formulating the 91 article in 2000, and applied the 5 to 35% excess progressive tax rate.

It should be said that this is a preferential policy.

Because, as an enterprise, partnership enterprises enjoy more legal protection and administrative services than individual businesses, and the reason is that they bear more tax liability than "quasi personal" individual businesses.

Especially after the release of the amendment to the partnership act in 2006, partnership enterprises have been established in the form of "limited partnership".

If we consider the situation of China's civil law countries, the "limited partnership", which is a new partnership form that draws on more corporate governance mechanisms, can be used as a tax entity directly by the European continental law countries, such as France.

However, when the state finance and taxation department made the 159 document, it still asked only to pay taxes according to the "quasi individual" of "individual industrial and commercial households".

In this way, the limited partnership investment enterprises do not need to directly calculate their taxable income to the personal comprehensive income as the common law countries do, apply the high excess progressive tax rate, or apply the higher capital gains tax rate, and do not need to follow the principle of "substance over form", such as France and other European continental law countries.

Since all kinds of partnership enterprises make a comprehensive tax payment according to the "quasi individuals" of the "individual businesses", the calculation of their tax base is quite different. The calculation of the tax base is quite different from the "property pfer income" calculated by the individual directly engaged in equity investment according to the "accidental income". Therefore, the applicable tax rate should not be applied simply.

Although the "balance of the original value of the pfer of property and the balance after the reasonable cost" can be regarded as the tax base, the "reasonable cost" that can be deducted is limited to the paction fees which are directly related to the investment, and the fees that can be accurately judged.

Because of the high tax base, a relatively low single proportional tax rate can be applied (specifically 20%).

When an individual is indirectly engaged in equity investment through a limited partnership, the taxable income of the partnership can be collected annually and deducted three times when calculating taxable income: (1) deducting any investment loss within 5 years; (2) deducting all kinds of management expenses of the partnership enterprise (including not only the paction costs involved in investing activities, but also the management fees and performance rewards paid to the management by far more than the former); (3) deducting the basic living expenses of the investors (according to the fiscal and taxation [2011]62 number, the current deduction is 42 thousand yuan / year).

After deducting the above three kinds of deductions, personal taxable income indirectly invested in equity investment through limited partnership is significantly reduced. If the tax rate is still applied to the "pfer of property" obtained by individuals directly engaged in equity investments, it will inevitably result in obvious tax burden: the private sector has enjoyed more legal protection and administrative management services through limited partnership investment, but its actual tax burden is significantly lower than that of individuals directly engaged in equity investment. How to understand the preferential tax policies for local partnership fund PE?

From the perspective of international practice, countries usually only provide appropriate policy support for the market failure of venture capital funds. For general equity investment funds, they are no longer given policy support because they have been fully effective in the market, but rather through proper supervision to prevent risks.

However, in recent years, many local governments have used equity investment funds as a means of attracting foreign investment, competing to introduce various preferential policies.

There are many kinds of policies and policies are becoming more and more powerful.

Many of them belong to the ultra vires tax relief policy.

For example, according to Article 159, the calculation of taxable income of all types of partnership enterprises should be carried out in accordance with Article 91 of 2000. In accordance with the taxable income calculated in Document No. 91, natural partners, whether general partners or limited partners, should apply the excess progressive tax rate of 5%-35% according to the "operating income of individual businesses".

However, local governments generally exceeded their powers to reduce the tax rate of natural partners to 20%.. In accordance with the national tax policy, "ex post and return" is a disguised tax relief, but many local governments retain local governments 40% (8 percentage points) and then return them to investors.

According to Article 159, dividend income from partnership funds should be consolidated as "other income" to be taxed in taxable income, but many local governments exceed their powers to exempt them.

The business tax of partnership fund should be regarded as the main body of business tax in accordance with the regulations of the state on business tax administration.

However, many local governments mistakenly believe that since the partnership does not need to be the subject of income tax payment, it does not need to be the subject of business tax payment, and the business tax is also exempt.

Although it was approved by the State Council in January 2009, the state finance and taxation department jointly issued the notice on resolutely stopping tax exemption and exemption from overpowers and strengthening tax administration according to law (fiscal and taxation [2009]1), but the competition for preferential tax policies of local governments has intensified.

It is necessary to create the necessary policy environment for the development of equity investment funds.

However, if the tax rate is too low to affect social equity, such a policy will be very difficult to last.

In the United States, capital gains tax has been directly incorporated into personal income tax in the United States, which applies a fairly high excess progressive tax rate.

After the collapse of the Internet economic bubble in 2001, George W. Bush proposed a tax cut to revive the economy.

According to the tax reduction act, the general capital gains tax applies to the tax rate applicable to individual ordinary income, the highest rate is 35%, but the capital gains with a period of more than 1 years are applied to a maximum tax rate of 15%.

This policy has played a role in encouraging long-term investment, but has also caused many criticisms.

The "Blackstone partnership tax avoidance storm" that broke out in 2007 and the "occupy Wall Street movement" that has been spreading in recent years are largely related to the low capital gains tax rate.

Therefore, at present, the United States and the government are all discussing the return of capital gains to the highest level of 35%.

In recent years, our country

The practice of fund development has shown that the preferential tax policies of local governments for partnership PE funds not only damage the dignity and authority of the state tax law, but also do harm to the social harmony and the steady development of the equity investment industry.

In recent times, there has been public opinion that individual businesses should pay a 5 to 35% excess progressive tax in the small businesses of the real economy. Very rich individuals can enjoy more legal protection and administrative services through limited partnership businesses, but in fact they only need to pay taxes according to 12% single proportional tax rates.

Some excellent and conscientious insiders also said that various local preferential tax policies not only contributed to the "PE bubble", but also formed the phenomenon of "universal PE", resulting in vicious competition in the industry. It also created conditions for some criminals to use local preferential tax policies to seduce investors and raise funds illegally.

Therefore, from the perspective of safeguarding the unification of national tax law, promoting social harmony and the steady development of the equity investment industry, it is necessary to straighten out all kinds of ultra vires tax reduction policies promulgated by local governments.

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