Whether the registered root of capital reserve conversion is subject to individual income tax

Lu Yun, Inspector of the Income Tax Department of the State Administration of Taxation, answered questions on income tax related policies on April 11, 2012, including netizen 1604 ] Q: Do you need to pay individual income tax when capital reserve is converted into capital? Inspector of the Income Tax Department Lu Yun is:

According to the notice of the State Administration of Taxation on the levy and exemption of individual income tax on the conversion of share capital and the distribution of bonus shares by joint-stock enterprises (Guo Shui Fa [1997] No. 198) and the reply of the State Administration of Taxation on the individual income tax payable on the income from the appreciation of individual shares in the process of transforming the former urban credit cooperatives into urban cooperative banks (Guo Shui Han No. 289 199), the conversion of capital reserve into increased share capital formed by the premium issuance income of joint-stock enterprises does not belong to the distribution of dividends and bonuses. The amount of converted share capital obtained by an individual shall not be regarded as personal income and shall not be subject to individual income tax. All others shall be taxed in accordance with the law.

However, on April 24, 2012, the General Office of the State Administration of Taxation issued the "Follow-up Answers to Questions from Interview Netizens of the State Administration of Taxation "Taxation Development and People's Livelihood"": "20 netizen dongyanli6: In 2011, when the shareholders of our company invested in monetary funds, the part that exceeded the share capital price formed a capital premium, and now it is ready to increase the share capital with this part of the capital premium.

Answer: We are studying whether individual income tax will be levied on the conversion of capital premium to share capital of non-listed companies, please refer to the official document. ”

Therefore, how the capital reserve is formed is the key factor, and whether it is necessary to pay individual income tax should be consulted with the local tax authority, and the reply of the local tax authority shall prevail.

The conversion of capital reserve into share capital by joint-stock enterprises does not belong to the distribution of dividends and bonuses, and the amount of converted share capital obtained by individuals does not belong to personal income and is not subject to individual income tax.

The objects of personal income tax are as follows:

Statutory objects. The taxpayers of China's individual income tax are those who reside in China and have income, as well as individuals who do not reside in China but obtain income from China, including Chinese citizens, foreign nationals who obtain income in China, and compatriots from Hong Kong, Macao and Taiwan.

Resident taxpayers.

Individuals who have a domicile in China, or who have not been domiciled but have resided in China for one year, are resident taxpayers and shall bear unlimited tax liability, that is, they shall pay individual income tax on their income obtained within and outside China in accordance with the law.

Non-resident taxpayers.

Individuals who have no domicile and do not reside in China, or who have no domicile and have resided in China for less than one year, are non-resident taxpayers and bear limited tax liability, and only pay individual income tax on their income obtained from China in accordance with the law.

A list of whether individual income tax is levied on income obtained by foreigners in China.

According to the relevant provisions of Guo Shui Fa [1997] No. 198 and Guo Shui Han [1998] No. 289, the conversion of capital reserve into share capital by joint-stock enterprises does not belong to the distribution of dividends and bonuses, and the amount of converted share capital obtained by individuals does not belong to personal income and is not subject to individual income tax. The "capital reserve" mentioned here refers to the capital reserve formed by the premium issuance of joint-stock enterprises. The amount obtained by individuals from the converted share capital shall not be subject to individual income tax as taxable income.

The part of personal income distributed by other provident funds that do not conform to this shall be subject to individual income tax in accordance with the law.

According to the relevant provisions of Yue Di Shui Han [2005] No. 345, the basic principles of the Individual Income Tax Law of the People's Republic of China and the spirit of the Reply of the State Administration of Taxation on the Issue of Levying Individual Income Tax on the Conversion of Surplus Provident Fund to Increase Registered Capital (Guo Shui Han [1998] No. 333), a limited liability company uses after-tax profits to increase its registered capital, which is actually the company distributes dividends and bonuses to shareholders from after-tax profits, and the shareholders then increase their registered capital with the dividends and bonuses they receive. Therefore, the part that belongs to the individual shareholders and reinvested in the company to increase the registered capital should be levied according to the item of "interest, dividends and bonus income".

In general, the conversion of capital reserve into capital is not subject to individual income tax. The company's provident fund is used to make up for the company's losses, expand the company's production and operation, or increase the company's capital. The amount of converted share capital obtained is not regarded as personal income and does not need to pay individual income tax.

1. What are the conditions for profit distribution under the Company Law?

The restrictions on the distribution of profits under the Companies Act are as follows:

1. If the loss of the enterprise in the previous year has not been made up, the surplus provident fund and the community chest shall not be withdrawn;

2. The enterprise must withdraw the statutory surplus reserve fund according to a certain rolling ratio of the after-tax profit of the current year, and can no longer withdraw when the statutory surplus reserve fund has reached 50% of the registered capital;

3. Before withdrawing the surplus provident fund, profits shall not be distributed to investors;

4. If an enterprise incurs a loss in the current year, in principle, it shall not distribute profits to investors.

2. What is the impact of registered capital on the company's operation?

The increase in the registered capital of the enterprise indicates the expansion of the strength of the enterprise, and the main impact is the reduction of the asset-liability ratio of the enterprise, which is an important indicator of the operation of the enterprise, such as when applying for a loan from the bank, generally speaking, the asset-liability ratio of more than 70% is unable to apply for a loan. Of course, how to use surplus reserves to increase capital will not have any impact.

3. What is the role of the provident fund as stipulated in the Company Law?

According to Article 168 of the Company Law of the People's Republic of China, the role of the provident fund is to make up for the company's losses, expand the company's production and operation, or increase the company's capital. However, the capital reserve cannot be used to cover the company's losses.

When the statutory reserve fund is converted into capital, the reserve fund retained shall not be less than 25% of the registered capital of the company before the conversion.

Article 203 stipulates that if the company fails to withdraw the statutory provident fund in accordance with the provisions of this law, the people's finance department at or above the county level shall order it to make up the amount that should be withdrawn, and may impose a fine of less than 200,000 yuan on the company.

Article 2 of the Individual Income Tax Law of the People's Republic of China.

The following personal income shall be subject to the personal income family tax:

1) Income from wages and salaries;

2) Income from remuneration for labor services;

3) Income from author's remuneration;

4) Income from royalties;

5) Business income;

6) Income from interest, dividends and bonuses;

7) Income from property lease;

8) Income from the transfer of property;

9) Incidental gains.

Resident individuals who obtain the income from items 1 to 4 of the preceding paragraph (hereinafter referred to as "comprehensive income") shall calculate individual income tax on a consolidated basis according to the tax year; For non-resident individuals who obtain the income in items 1 to 4 of the preceding paragraph, the individual income tax shall be calculated on a monthly or sub-itemized basis. Taxpayers who obtain the income from items 5 to 9 of the preceding paragraph shall calculate individual income tax separately in accordance with the provisions of this Law.

The notice of the State Administration of Taxation on the exemption of individual income tax on the conversion of share capital and the distribution of bonus shares by joint-stock enterprises stipulates in document 1997 198:

1. The use of capital reserve to increase share capital by joint-stock enterprises does not belong to the distribution of dividends and bonuses, and the amount of converted share capital obtained by individuals shall not be regarded as personal income, and individual income tax shall not be levied.

2. The distribution of bonus shares by joint-stock enterprises with surplus reserve funds is in the nature of dividends and bonuses, and the amount of bonus shares obtained by individuals shall be taxed as personal income.

Therefore, there is no individual income tax on the conversion of capital reserve into share capital; The conversion of surplus provident fund into share capital should be taxed as personal income. According to the "income from interest, dividends and bonuses", the income tax shall be calculated and paid at a proportional rate of 20% for each income. The payment unit will open and pay on behalf of the payment unit.