The business situation is changing rapidly, sometimes for strategic deployment, we may give part of the business to others, if we want to complete the industrial and commercial transfer, we need to carry out the company's share transfer. As we all know, the transfer of shares involves the declaration and payment of enterprise income tax, but some people are unwilling to bear this tax, and enterprises with overseas structures will consider trying to evade the tax payable by transferring the control of the domestic company through the overseas transfer of shares. In the 16th issue, we will share with you a real case of overseas equity transfer.
Company A wants to transfer its domestic business subsidiary to another person, but it does not transfer in China, but realizes it overseas, how does it do it?Let's look at the overall structure of Company A. The actual operating entity of Company A is in China, and the overseas Hong Kong company directly holds the shares, the Hong Kong company is held by the BVI company, and the BVI company is held by the overseas company A. When it is necessary to transfer the business to Company B, Company A enters into an equity transfer agreement with Company B's Hong Kong company through its BVI company. In this real-world case, the transfer pricing is 40100 million yuan, it is conceivable that its taxes are really a lot. After the completion of the transfer, Company B achieved the purpose of indirectly controlling the original domestic business subsidiary of A.
You may wonder, why not directly transfer at the level of A's Hong Kong company?If the transfer is carried out directly at the level of A's Hong Kong company, and the shareholders of the domestic business subsidiary change, and the industrial and commercial change is required, the operation of the overseas share transfer will be disclosed with a high probability.
In the actual operation of Company A, after receiving the equity transfer money, the BVI company should pay enterprise income tax, but since the tax jurisdiction principle of the BVI company is territorial, and the BVI company of A does not operate in the local field, it does not need to pay local tax on the income from the equity transfer. At the same time, the BVI company did not voluntarily file tax returns elsewhere. Taking advantage of the information asymmetry at home and abroad, Company A successfully got out of the business and got the proceeds of the share transfer, but also did not pay the tax cost, which is naturally beautiful.
But it has to be said that because in the structure of Company A, the BVI company and the Hong Kong company are just conduit companies in a multi-tier equity structure. In essence, it is the business subsidiaries in China that really have substantive operations. The operation of Company A and Company B appeared to be a transfer of shares to a Hong Kong company, but in fact it was an indirect transaction of the domestic target company. Once Company A implements this practice, it is very likely that the Chinese tax authorities will determine that the income is ** in China and needs to pay tax to China.
From the perspective of income, the income of a BVI company is in China, so it should pay income tax to the China Tax Bureau. According to China's corporate income tax law, non-resident enterprises are subject to corporate income tax at a reduced rate of 10%, and the operation of Company A has caused about 400 million yuan of tax revenue in China.
There is a good saying, "The gift given by fate has long been secretly marked**" Company A seems to have "saved" a huge amount of taxes and obtained huge benefits, but China has already formulated relevant restrictions for this behavior. According to Announcement No. 7 of 2015 of the State Administration of Taxation, the act will be deemed to have an unreasonable commercial purpose, and the BVI company of Company A will be subject to withholding tax. In this case, Company A's BVI was eventually requisitioned 40.3 billion yuan of withholding tax.
In addition, it should be reminded that in daily cross-border business, we should not only pay less tax, but also pay attention to avoid paying more tax. What does that mean?On the one hand, cross-border business should pay attention to whether China** has tax jurisdiction, and whether taxpayers have the obligation to take the initiative to declare to China to avoid underpayment of taxes, resulting in tax evasion and tax evasion. On the other hand, China has signed special tax agreements such as bilateral agreements with many overseas countries, and if our actual business meets the relevant conditions, we can apply to the competent tax authorities to enjoy reasonable preferential treatment and avoid overpaying taxes.
Red-chip structure - a detailed explanation of the classic structure of overseas listing丨Issue 15.
The offshore exemption for Hong Kong companies will result in hidden income丨Why do many sellers want to open a Hong Kong company in the 14th issue?丨Issue 13.
The vernacular explains through China's first major tax - value-added tax丨12 periods.
The Role and Positioning of Hong Kong Companies in Business丨Issue 11
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