Wind data shows that a total of 45 A-share listed companies will be delisted in 2023. In January 2024, Huayi Electric Co., Ltd. issued an announcement that it received the "Decision on the Termination of Listing of Huayi Electric Co., Ltd." from the Shanghai ** Stock Exchange, which will not enter the delisting period and will terminate the listing and delisting on January 16, 2024. After the termination of the listing, Huayi Electric entered the National Small and Medium-sized Enterprises Share Transfer System Co., Ltd., and carried out share transfer related matters in accordance with the requirements. So, how should individual investors pay individual income tax on the dividends and dividends obtained from delisted companies?
Case Introduction
On December 18, 2020, Company A was listed on the Shanghai Stock Exchange. According to the ** listing rules, a resident individual A, who is the controlling shareholder of Company A, obtains the restricted shares of Company A and undertakes not to transfer or entrust others to manage the 40 million shares issued before the issuer's initial public offering ** directly and indirectly held by him within 36 months from the date of listing of the issuer, nor will the issuer repurchase this part of the shares. On August 18, 2021, resident individual B purchased 100,000 shares of Company A at a price of 10 yuan ** in the secondary market through centralized trading.
On September 6, 2023, in accordance with the relevant rules, the Shanghai Stock Exchange made a decision to terminate the listing of Company A, and Company A** will not enter the delisting period for trading, and will immediately arrange for the transfer of shares to the National SME Share Transfer System and other trading venues for share transfer. After being delisted, Company A was listed on the delisting section of the National Equities Exchange and Quotations on October 12, 2023. On October 18, 2023, resident individual C purchased 10,000 shares of Company A at a price of 10 yuan through call bidding.
On October 30, 2023, by the resolution of the board of directors, Company A intends to implement a special dividend plan for shareholders in 2023, based on the total share capital of the company on the record date of the implementation of equity distribution, and distribute a cash dividend of 10 yuan (tax included) to all shareholders for every 10 shares based on undistributed profits. On November 17, 2023, Company A implemented a special dividend plan for shareholders, with the share record date on November 24, 2023 and the ex-dividend date on November 27, 2023.
Suppose that on April 1, 2024, the general meeting of shareholders of Company A approved the 2023 annual equity distribution plan, based on the company's existing total share capital, a cash dividend of RMB 10 (tax included) will be distributed to all shareholders for every 10 shares of undistributed profits, and 10 bonus shares (tax included) will be given to all shareholders for every 10 shares of undistributed profits. On April 15, 2024, Company A implemented the 2023 annual equity distribution plan, which is consistent with the distribution plan deliberated and approved by the general meeting of shareholders, with the share record date of April 18, 2024 and the ex-dividend date of April 19, 2024. In addition to the above-mentioned transactions, there were no other transactions between the individual shareholders of Company A, B and C.
Policy analysis
After Company A is delisted, how should individual shareholders A, B and C of Company A pay individual income tax on the dividends and dividends obtained by holding shares of Company A?
According to the "Announcement on Continuing to Implement the Differentiated Individual Income Tax Policy on Dividends and Dividends of Listed Companies on the National Small and Medium-sized Enterprise Share Transfer System" (Announcement No. 78 of 2019 of the Ministry of Finance, the State Administration of Taxation and the CSRC, hereinafter referred to as Announcement No. 78), if an individual holds a listed company for more than 1 year, the individual income tax on dividends and dividends is temporarily exempted. If an individual holds the ** of a listed company and holds the shares for less than 1 month (including 1 month), the full amount of its dividend income shall be included in the taxable income; If the holding period is more than 1 month to 1 year (including 1 year), the dividend income shall be temporarily reduced by 50% and included in the taxable income; The above-mentioned income is subject to individual income tax at a uniform rate of 20%.
According to Article 7 of Announcement No. 78, the dividends and dividends obtained by individuals and **investment** from the delisted companies listed on the National Equities Exchange and Quotations System shall be subject to individual income tax in accordance with the provisions of Announcement No. 78, but the restricted shares of the delisted companies shall be subject to the provisions of Article 4 of the Notice of the Ministry of Finance, the State Administration of Taxation and the China Securities Regulatory Commission on Issues Concerning the Implementation of the Differentiated Individual Income Tax Policy on Dividends and Dividends of Listed Companies (CS 2012 No. 85). Article 10 of Announcement No. 78 further clarifies the time requirement, that is, if the delisted company pays dividends and dividends, and the equity registration date is from July 1, 2019 to June 30, 2024, the dividend income shall be implemented in accordance with the provisions of this announcement. On the date of implementation of Announcement No. 78, the holding time of listed companies, two network companies and delisted companies** already held by individual investors** shall be calculated from the date of acquisition.
That is to say, if individuals and **investment** hold non-restricted shares of the delisted company, their equity registration date is from July 1, 2019 to June 30, 2024, and the dividend income obtained can be subject to the dividend and dividend differentiated individual income tax policy. If an individual holds dividends and dividends obtained from the restricted shares of a delisted company, he or she needs to calculate and pay individual income tax in accordance with the provisions of Document No. 85 of 2012.
Practical Operations
Combined with the case, shareholder A holds the restricted shares of Company A, and the restriction period expires on December 18, 2023 and the procedures for lifting the restriction will be completed. The date of the implementation of the special shareholder dividend of Company A is November 17, 2023, the share registration date is November 24, 2023, and the ex-dividend date is November 27, 2023, which belongs to the dividend income obtained before the lifting of the ban. According to the Cai Shui 2012 Document No. 85, A needs to include this part of the dividend income into the taxable income at a reduced rate of 50%, and apply the tax rate of 20% to calculate and pay individual income tax.
On April 19, 2024, Company A obtained cash dividends and bonus shares for 2023. If the time for which A holds the shares of Company A is more than 1 month but less than 1 year from the date of lifting the ban on restricted shares, the dividends and dividends obtained by A shall be temporarily reduced by 50% and included in the taxable income, and the individual income tax shall be calculated and paid at a rate of 20%. At the same time, according to the Notice of the Ministry of Finance, the State Administration of Taxation and the China Securities Regulatory Commission on Issues Concerning the Differentiated Individual Income Tax Policy on Dividends and Dividends of Listed Companies (CS 2015 No. 101), the holding period of the shares of Company A held by resident individual A is less than one year, and individual income tax is not withheld for the time being. When the individual is transferred, the registration and clearing company shall calculate the tax payable according to the holding period, and the share custodian institution shall deduct it from the personal fund account and transfer it to the registration and clearing company, and the registration and clearing company shall transfer the tax to the delisted company within 5 working days of the next month, and the delisted company shall declare and pay to the competent tax authority within the statutory declaration period of the month in which the tax is received.
On August 18, 2021, B purchased 100,000 shares of Company A in the secondary market through centralized trading, and until November 27, 2023 and April 19, 2024, the period for which B held the shares of Company A was more than 1 year from the date of acquisition. According to Announcement No. 78, the above-mentioned dividends and dividends obtained by B due to holding shares of Company A can be temporarily exempted from individual income tax.
When C obtains 10,000 shares of Company A through call auction on October 18, 2023, obtains the special shareholder dividend of Company A on November 27, 2023, and obtains the cash dividend and bonus shares of Company A in 2023 on April 19, 2024, the holding period is more than 1 month but less than 1 year from the date of acquisition, and the dividend income is temporarily reduced by 50% to be included in the taxable income, and the tax rate of 20% is applied to calculate and pay individual income tax. At the same time, according to Announcement No. 78, if the holding period of the shares of Company A held by C is less than 1 year and has not been transferred, the delisted company will not withhold individual income tax for the time being, and will declare and withhold it according to the regulations when the individual transfers.
Imprint Notice
This article**: China Tax News, Author: Liang Fushan, Author's Affiliation: Tax Cadre College of the State Administration of Taxation. Follow [Ming Tax] to subscribe for more content.