Three Departments Announce a Temporary Individual Income Tax Exemption Policy for Income Obtained by Individuals from the Transfer of NEEQ-listed Companies' Non-original Shares
Recently, three departments, including the Ministry of Finance ("MOF"), have jointly issued the Circular on the Individual Income Tax Policy for Individuals' Transfer of Shares of Companies Listed in the National Equities Exchange and Quotations (the "Circular").
The Circular states that, retrospectively from November 1, 2018 and thereafter, income obtained by an individual from the sale of non-original shares of a company listed in the National Equities Exchange and Quotations ("NEEQ") will be temporarily exempt from individual income tax. However, income received by an individual from the transfer of original shares issued by a NEEQ-listed company will be seen as the "income derived from property transfers" and thus be subject to individual income tax at the 20-percent tax rate. In addition, the Circular expressly states that, before September 1, 2019, for individual income tax on the income obtained by individuals from selling original shares issued by NEEQ-listed companies will be collected and administered under existing provisions in respect of income derived from equity transfers, and parties buying in these shares are withholding agents, and tax authorities at the place of invested enterprises will take charge of the tax collection and administration. As of September 1, 2019 and thereafter, securities institutions where shares are placed under custody will be the withholding agents, and competent tax authorities at the place of such securities institutions will be responsible for the tax collection and administration.