Study On China's Income Tax Law Of Stock Transters In Non-Resident Enterprises

Based on recently issued income tax regulations on equity transfers of on-resident enterprises, this article is devoted to firstly, clarify general uestions about transfers of hares according to new provisions, including how to calculate the taxable income, hether the undistributed retained earnings in the transferred shares can still be deducted from the purchase price, etc.; then illustrate the differences in income tax burdens for both stock transferors and transferees, through a comparative analysis between previous and current tax regulations, and between the two methods of income taxation treatments for gains from sales of shares under different applicable conditions prescribed by new rules, so as to demonstrate that theoretically the equity transferor applying the special taxation treatment would enjoy an income tax deferral, while the transferee, however, may potentially face additional tax burdens when reselling the purchased shares afterward.In the second part of this article, the indirect equity transfer as common means of tax avoidance employed by non-resident enterprises is discussed in depth under the new legal regime. The possible problems, such as double taxations, conflicts among different tax jurisdictions, etc., may derived from the economical substance review of the equity transfer by tax authorities are hereby posed forward. The U.S. experience on the same issue is then introduced as a worthwhile reference.Finally, the last part tries to propose two suggestions in order to handle to the problems identified above: first to pay sufficient attention to the tax guidance; second, to apply relevant provisions prudently and meanwhile strengthen international cooperation in the field of anti-avoidance.