Individual Income Tax Issue: Acquiring Enterprise with Original Accumulated Surplus
2013-May-27 Source:
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On May, 7, 2013, State Bureau of Taxation issued Announcement of the State Administration of Taxation on Issues Concerning Individual Income Tax on Share Capital Increases with Original Accumulated Surplus after Acquisition of Enterprise Equity by Individual Investors (“Announcement”). How much tax an individual investor shall pay after he acquires an enterprise and changes the surplus into shares? This issue is detailed in the Announcement.

Where the share price is no less than the net asset value, and when the surplus is changed into the capital increase, the margin shall not be taxed. While the share price is lower than the net asset value, if the margin has already be paid by the shareholder, he will not pay any tax when the surplus is changed into capital increase, however if he has not paid the margin, he will be imposed tax as he gains “interest, dividend and bonus”.

It should noted that the Announcement is only applicable to 100% share acquisition by individual investors.

(This information is provided by Lawyer Kelly Xie from Guangdong KaiTong Law Firm in friendship. It is not any legal opinion or legal grounds addressed to any organization or individual. For inquiry, please contact Kelly via email at or by phone on 13926185641.)

Editor: Olivia
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