On 7 July, the State Administration of Taxation published the Issues Concerning Income Tax on the Transfer by Enterprises of Shares of Listed Companies with Selling Restrictions Announcement to govern the levy of tax on the transfer by enterprises of shares with selling restrictions which are held for individuals, and on the transfer of shares with selling restrictions prior to the end of lock-up periods. The announcement took effect on 1 July.
Identity of taxpayers
Enterprises that derive income from the transfer of shares with selling restrictions will pay corporate income tax. These enterprises may include institutions, social organizations and privately run non-enterprise work units.
Shares held for individuals
Where shares with selling restrictions have been purchased by individuals with their own money but held by enterprises on their behalf as a result of the reform of the split-share system, the income derived by the enterprises from the transfer of these shares should be treated as taxable income of the enterprises.
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Business Law Digest is compiled with the assistance of Haiwen & Partners. The authors can be emailed at firstname.lastname@example.org. Readers should not act on this information without seeking professional legal advice.