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SAT Clarifies Individual Income Tax Rules On Transfer Of Shares

07.01.11 00:57 Age: 7 yrs
SAT Clarifies Individual Income Tax Rules On Transfer Of Shares

Beijing, China –December 24, 2010

 

The State Administration of Taxation (SAT) recently made its Announcement [2010] No.27 to clarify some issues concerning the verification of the taxation basis for individual income tax on income from equity transfer. The Announcement, which does not apply to the transfer of shares of listed companies, provides that where a natural person transfers his equity held in a company with his own investment (hereinafter referred to as the equity transfer) and derives income therefrom, such transaction shall be deemed to have been completed at fair market value for determining the taxation basis, and, where the taxation basis is manifestly lower without any reasonable ground, the competent taxation authority may use the methods as specified in the Announcement to verify the taxable amount. The Announcement also sets out specific provisions with respect to the methods for determining whether a taxation basis constitutes a manifestly lower one without any reasonable ground.

 

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