Research Of Individual Income Tax On Equity Transfer

When it comes to the research and practice of natural person’s equity transfer income taxation theory, there are still some major problems remain unsolved. For example, “Whether individual income tax should be levied” on the investment behavior after non-monetary assets’ valuation appreciation? And “If so, how should it be levied?” Upon the increasingly frequent capital market transactions and complicated trading structure, it is worth thinking how we can deal with the tax treatment of the valuation adjustment mechanism(“VAM”) in an equity transfer agreement. While in the perspective of traditional transaction mode, considering the development of our security market does the situation that nature person transferring listed companies’ stock income without being levied income tax follow the basic principle of tax law? As time goes by, should such unreasonable policies, which widen the wealth gap between rich and poor, still be allowed? All these questions, haunting both theory and practice, result in further studying and research. And this is also why this essay is written.Hopefully, through the deep analysis of two of natural person’s equity transfer income taxation cases, the article studies the particularity problems; also the common problems existed, finding the typical problems in natural person’s equity transfer income taxation rules, even the income tax system and the tax law system of China. And combine with the mature experience of equity transfer income taxation home and abroad, through the comparison and analysis, the article hope to explore the existing problems in the tax system and to correct the defects of them. Combine with the author’s knowledge limited, the article intend to give the feasible and practical suggestion of natural person’s equity transfer income taxation in detail.The study on equity transfer individual income tax will be case-based and comparatively-analyzed. Apart from the introduction and conclusion, the article will be divided into three parts: Part One and Part Two will be two controversial cases placing emphasis differently, and Part Three will be a further study on some common issues.The first part of this paper, which is based on “Aima Mining Case”, mainly discusses whether natural person shall levy personal income tax under non-monetary assets appraisal value investment and if so, how? To answer the question “whether the tax should be levied?” the article carefully analyses the doctrines and theories of the concept of the income within the bounds of the law, and then arrived at a correct interpretation about income. No matter in theory or in practice, people always hold different views on the issue of taxation. The different viewpoints on taxation mainly stem from the different understanding of income and its starting time. Supported by the taxability theory, the article explained how to define whether the income should be levied or not in accordance with conditions. Secondly, when solving the problem that “how to collect the taxes”, taxation straits caused by the short of the tax cash flow has brought about an insurmountable difficulty to the income taxes collection work after people earning money from the investment behavior after non-monetary assets’ valuation appreciation. It’s also unreasonable to ask natural person to pay taxes immediately after their equity investment behavior. Besides, the current form of taxation, in which the equity transferees shall be the withholding agents, also causes a series of problems, like natural person are trying to attain the maximum tax efficiency by fair means or foul; some people else are using tax avoidance strategies to avoid equity transaction tax payments and shifting their withholding agents. To solve these existing problems, further discussion is made to find out whether there is a more appropriate way of collecting taxes. Through the comparison of similar tax issues,it was found that the method of deferred taxation had been taken to solve these kinds of problems in enterprise income tax law. This way in turn relieves the problem of the tax cash flow shortage. While dealing with individual equity transfer issues, we may gain the experience of deferred taxation in dealing with the cash flow shortage as well. When it comes to the selection of withholding agents, the enterprise which was equity transferred should be regarded as the withholding agent. Thus, the taxes may be handed in fully and efficiently, which is an essential part of efficient tax collecting principle.The second part of this paper, which is based on “Pudong Soft Case”, mainly illustrates the issue of subsequent tax deal with the issue of involving the “VAM” during the investment in equity transfer transactions. The case indicates that currently there are divided ideas of China’s VAM during equity transactions, the leading idea focuses on the unclear definition of the legal nature of compensate. Under the circumstances, the ambiguity of the tax deal with earns-out creates excuse for the tax authority’s different implementing standardization, and at the same time, leaves taxpayers in tax risk of uncertainty. Through the investigation of two kinds of profitable compensation tax treatment modes in the United States and Australia, the author not only analyze the importance of clarity of the tax deal with the VAM and the main existing problems, but also suggested that our country may adopt the Australian mode of two-way tax deal with the VAM for China’s individual income tax on equity transfer transaction.After analyzing the particular problems in respect of the income tax from the two cases above, the third part of this paper is concentrated on the reflected common issues. Firstly, equity transfers problems during the implementation of the individual income tax. The author thinks that the main reason is because China’s individual income tax on equity transfer legislative level is too low to satisfy with taxpayers or the tax authority to obey it. Though statistics, charts and forms, the author proves that it is the very reason leading to the competent authorities’ incorporation. Secondly, suspensions for any transfer of shares of listed companies in our country income levy personal income tax policy have already been issued for a long time. The policy was unveiled in the specific historical, economic and political background, but now it is a new stage of perfecting our tax system. The problem of tax injustice and the excessively increasing gap between rich and poor cannot be ignored any longer. Analyzing the tax system of the countries like Britain, the United States, Germany and Japan, the author thinks that the cancellation of temporarily exempted from tax and seeking mature experience from developed countries would be the next step to perfect individual income tax on equity transfer is of the tax fair.This article mainly uses case research and comparative research methods to study and analyze the relevant legal issues of nature person equity transfer income taxation. On the use of case study method, two relatively typical natural person equity investments have been selected to case study analysis. Combing data and charts, the auxiliary analysis is intuitive and illustrating. In addition, this article also compares and analyses the mainstream theory of theoretical research on the definition of income, and presents the author’s concept of income. At the same time, in order to study the natural person to invest with non-monetary assets evaluation value and the VAM involved in equity investment issue, the article also compares with some representative countries accordingly to the equity transfer income levy personal income tax issues related to the different processing method and attitude toward income taxation. It is not only just to compare, but also to take a reference. And to provide enlightenment in perfecting the income tax system for natural person equity transfer.Innovation of this paper are as follows: First of all, this article demonstrates the taxation rationality in investment of asset valuation appreciation generated by non-monetary asset; Secondly, the article raise the legislation advice that the enterprise which was transferred should take the withholding obligations instead of the equity transferee; Thirdly, analyzes the tax deal issue of VAM and put forward the reference of the improvement direction; Fourthly, the article analyzes the rationality and necessity of cancellation the duty-free tax policy with natural person stock transfer income. Fifthly, the tax issue of this article is the theoretical and practical significance. The two tax cases selected are typical and of practical research value. Last but not least, on the basis of previous research, the article put forward improvement of the natural person equity transfer income tax advice combined with the latest Announcement No. 67.The shortcomings of this article is due to the limitation by the characteristics of the case typed of natural person equity transfer transactions, and also because of the immature transactions information disclosure mechanism of China’s capital market, this two cases chosen are both the situation of equity payment in shares of listed companies refusal under natural original unlisted companies stakes. Case structure and transfer mode is relatively similar, failing to reflect more problems in the diversification of trade structure. Also, due to the natural person equity transfer trading scale that of enterprise equity, the research attention of theoretical is not consistent, causing that the existing works and journals focused on the study of enterprise equity transaction tax issues. Thus is the major difficult in writing the article. And it also cause the restriction to the article’ rational and scientific.