Study On Tax Preferential System Of Equity Incentives In China

In the current era of public entrepreneurship and innovation,human capital is increasingly becoming an important factor in the long-term and stable development of enterprises.Many companies have started to implement equity incentive plans in order to retain outstanding talents and ensure that they serve the company for the long-term.Whether the equity incentive can really exert a long-term incentive function depends on whether the employee hold the underlying stocks for a long time,and the tax is also an important factor that affects the employee shareholding time.If the tax burden is too high,the employee would abandon to hold stocks because of considering excessive tax costs.But if the tax burden is too low,it would lead to equity incentives widening the gap between rich and poor.In addition,enterprises also take the tax as an important factor into consideration,to reduce the cost on tax and to pursue the maximization of benefits.Therefore,a reasonable legal system of taxation is a prerequisite for ensuring the effective implementation of equity incentive and an important guarantee for maintaining social fairness and efficiency.In the past,China has also introduced a series of tax policy to supporting the enterprises' equity incentive plan.But because of many imperfections,it is difficult to coordinate with the equity incentive system.In order to take maximum advantage of equity incentive mechanism,to retain talents and promote long-term and steady development of the enterprise,the State Administration of Taxation and the Ministry of Finance jointly issued the notification on The Improvement of Income Tax Policies on Equity Incentives and Technology Investment,to further increase tax incentives and reduce the tax burden on enterprises and related employee.After introduced,this policy has been warmly received and appreciated by many entrepreneurs and investors.It has been called the most substantial income tax policy for equity incentives in history.In addition to the introduction and conclusion,the full text is divided into four parts:The first part explains the theory of equity incentive and tax preferential legal system.This part introduces the theory of equity incentive and the theoretical basis of tax law in equity incentive,including the substantive taxation principle and the tax preferential theory of equity incentive.The second part introduces the history and current situation of the legal system of taxpreference for equity incentive in China.This part firstly sorts out the tax preferential legal policies of listed companies and non-listed companies,and then elaborates the present situation of legal system of tax preference for equity incentive in China,including its legislative mode and specific content.The third part discusses the existing problems of the preferential tax legal system of equity incentive in China.This part first analyzes the formal defects of the legal system of tax preference for equity incentives,including the legislative structure,legislative model and legislative technology these three aspects.Then this part analyzes the substantive problems of the legal system of tax preference for equity incentives from the three aspects,including the classification of the stock options,the determination of the tax payment link and the identification of the nature of the acquisition.The fourth part is the suggestion of perfecting the preferential tax system of equity incentive in China.In this part,firstly,from the perspective of perfecting its formal rationality,this article puts forward some suggestions on optimizing the preferential tax system of equity incentive.First,adhere to the legal principle of tax revenue and raise the rank of legislation.The second is to change the legislative model,to increase the procedural provisions,and to improve the hearing and publicity system.The third is to enrich the value and principle of norms,improve legislative technology.Then based on the specific national conditions in our country,this article draw lessons from relevant experience in the United States and put forward perfect suggestions on the specific design of the preferential tax system for equity incentive in our country.Firstly,the classification of stock options should be perfected under the framework of tax legal,different tax preferential policies should be given to different types of stock options,and the fairness of tax law should be reflected.Secondly,change the setting of tax payment and reduce the tax cost of the incentive.Finally adjust the ownership of equity incentive that the nature of the recognition,the capital gains will be included in the individual income tax levied items,and set the tax rate according to the length of time holding shares to enhance employee motivation.