February** Dynamic Incentive Program
One. Long-term equity investment and paid-in capital relationship
A long-term equity investment is a record of the amount invested in the investee, while paid-up capital records the amount invested by the investor.
If it constitutes a controlling investment, it needs to be eliminated from the perspective of financial statements, that is, the consolidation and offsetting of long-term equity investment and paid-in capital, which is the content of the accounting consolidated statements.
Two. Structuring tax burden analysis of several different investment models
Equity investment in the world is nothing more than the continuous evolution of the above-mentioned investment structure.
1) Dividend stage.
A summary table is shown in the figure below, and the specific explanation is described below.
1).Corporate shares.
Dividends and dividends of corporate shares (residents) are tax-exempt, and equity investment income such as dividends and dividends between qualified resident enterprises is tax-exempt income. Under the cost method, the accounting treatment of dividends is: borrow: dividends receivable and credit: investment income. This investment income should be included in the investor's income statement, so it needs to be transferred to tax-exempt income when the enterprise income is settled.
It is worth noting that the equity investment income such as dividends and bonuses between qualified resident enterprises refers to the investment income obtained by resident enterprises from direct investment in other resident enterprises.
So why are corporate shares (residents) tax-exempt? In fact, this is to avoid double taxation, otherwise the more you invest, the more you lose, and no one dares to invest. However, the final layer of corporate shares (residents) will inevitably involve natural persons, and the last layer is not exempt from tax for natural persons.
There is a special provision for corporate shares (non-residents), "a non-resident enterprise that has established an institution or place in China shall obtain dividends, bonuses and other equity investment income from the resident enterprise that is actually related to the institution or place".
The concept of resident is a concept unique to income tax, and the judgment of corporate income tax and individual income tax is different for residents, and personal income tax is judged by 183 consecutive days and is not based on nationality, but on the basis of 183 days of continuous residence. Resident enterprises are judged by the two criteria of registration or actual management institution.
Article 1 of the Individual Income Tax Law is inHave a domicile in Chinaor have no domicile and have resided in China for a total of one tax yearOne hundred and eighty-three daysof individuals, for resident individuals. Resident individuals shall pay individual income tax on income derived from within and outside China in accordance with the provisions of this Law.
InThere is no domicile and no residence in China, orNo place to liveIndividuals who have resided in China for less than 183 days in a tax yearBe a non-resident individual。Non-resident individuals shall pay individual income tax on their income derived from within the territory of China in accordance with the provisions of this Law.
The domicile here refers to: the term "domicile in China" in the Individual Income Tax Law refers to the causeHabitual residence in China due to household registration, family, and economic interests.
The tax year begins on January 1 and ends on December 31 of the Gregorian calendar.
Article 2 of the Enterprise Income Tax LawEnterprises are divided into resident enterprises and non-resident enterprises.
For the purposes of this Law, the term "resident enterprise" refers to an enterprise established within the territory of China in accordance with the law, or established in accordance with the laws of a foreign country (region) but with an actual management institution within the territory of China.
The term "non-resident enterprise" as used in this LawIt refers to the establishment in accordance with the laws of a foreign country (region) and the actual management organization is not in ChinaBut within ChinaEstablishment of institutions and venues, or there are no institutions or places in China, but there are**Businesses with income in China.
Therefore, non-resident enterprises either set up a place in China, or they are not established but have income in China. The territory here is Chinese mainland, excluding Hong Kong, Macao and Taiwan.
Corporate shares (non-residents) have set up an establishment in China**Dividends and dividends of resident enterprises in China are exempt from tax, why should they be exempt from tax? This is because non-resident enterprises with establishments in China are actually required to make final corporate income tax settlements, which is to avoid double taxation.
Corporate shares (non-residents) do not have an institutional presence in China, but only receive negative income, for example, a U.S. company invests in a company in Chinese mainland, and the U.S. company receives a corporate income tax on dividends, you need to check the tax treaty.
If a tax treaty is signed, the agreed tax rate for dividends and bonuses is generally 10%, and 5% for those who meet the requirements of 25% shareholding (except for partnerships). China and Japan have a negotiated tax rate of 10%.
The picture above shows the tax treaty between China and Japan.
The picture above is a tax treaty between China and Singapore.
2).Natural person shares.
If an individual obtains a listed company** from the public offering and transfer market, and the shareholding period exceeds 1 year, the dividend income is temporarily exempted from individual income tax.
If an individual obtains a listed company** from the public offering and transfer market, and the holding period is less than 1 month (including 1 month), the dividend income shall be fully included in the taxable income; If the holding period is more than 1 month to 1 year (including 1 year), 50% of the shareholding period shall be temporarily reduced to include the taxable income; The above-mentioned income is subject to individual income tax at a uniform rate of 20%.
For the restricted shares of listed companies held by individuals, the dividends and dividends obtained after the lifting of the ban shall be calculated and taxed according to the above provisions, and the holding time shall be calculated from the date of lifting the ban; Dividends and dividends obtained before the lifting of the ban will continue to be temporarily reduced and included in the taxable income at 50%, and the individual income tax rate of 20% will be applied.
Item 8 of Article 2 of the Notice of the Ministry of Finance and the State Administration of Taxation on Several Policy Issues Concerning Individual Income Tax (Cai Shui Zi 1994 No. 20):
Income from dividends and bonuses obtained by foreign individuals from foreign-invested enterprises.
However, at present, some taxpayers have reported that some grassroots tax authorities have adopted the relevant expressions in the "Several Opinions on Deepening the Reform of the Income Distribution System" (Guo Fa 2013 No. 6).
"Abolish the exemption of individual income tax and other tax incentives for dividends and bonus income obtained by foreign individuals from foreign-invested enterprises. ”
How it applies depends on the competent tax bureau.
3).Partnership shares.
The interest, dividends and bonuses repatriated by sole proprietorship enterprises and partnership enterprises shall not be incorporated into the income of the enterprise, but shall be separately regarded as the interest, dividends and bonus income obtained by the investor, and shall be calculated and paid according to the taxable item of "interest, dividend and bonus income" (20%, instead of 5% to 35% of business income 5% to 35%). In the case of repatriation of interest, dividends and bonuses for foreign investment in the name of a partnership enterprise, the interest, dividends and bonus income of each investor shall be determined in accordance with the spirit of Article 5 of the provisions attached to the Circular, and the individual income tax shall be calculated and paid according to the taxable items of "interest, dividends and bonus income".
Article 5 of the Circular, Article 5 Investors of sole proprietorship enterprises shall take all production and operation income as taxable income; The investors of the partnership shall determine the taxable income according to the total production and operation income of the partnership and the distribution ratio agreed in the partnership agreement, and if the partnership agreement does not stipulate the distribution ratio, the taxable income of each investor shall be calculated on the basis of the total production and operation income and the number of partners.
The term "income from production and operation" as used in the preceding paragraph includes the income distributed by the enterprise to individual investors and the income (profits) retained by the enterprise in the current year.
Three. Financial risk
i) Net assets per share are less than share capital.
Sinovel Wind Power lost 44 in 20155.2 billion yuan, and the net assets per share have been lower than the share capital.
ii) Failure to be included in the consolidated statements.
As of December 31, 2020, due to the case of Chen Dehong, the former actual controller of Elephant Advertising Co., Ltd., suspected of contract fraud, and the company's case against Wuhan Taidexin Venture Capital Center (Limited Partnership), Wuhu Huarong Yuwen Investment Center (Limited Partnership), Liu Baiquan and other 33 transferors of the equity transfer dispute has not yet been finalized by the court, Tianshan Biological Company has not been able to correct the 2018 issuance of shares to purchase Elephant Advertising Co., Ltd. 9621% equity interest and 44,359 investments in other equity instruments presented in the 2020 financial statements530,000 yuan, share capital 11,562460,000 yuan, capital reserve-share capital premium 168,002550,000 yuan, other payables - cash consideration payable to the original shareholders of Elephant Advertising Co., Ltd. 44,359530,000 yuan, other comprehensive income -179,565010,000 yuan.
As of December 31, 2020, Tianshan Biotech failed to exercise control over Elephant Advertising Co., Ltd. and did not include it in the consolidated financial statements. We are unable to determine whether Tianshan Biotech has control over Elephant Advertising Co., Ltd. on December 31, 2020, and Tianshan Biotech Co., Ltd. issued shares in 2018 to purchase Elephant Advertising Co., Ltd.96The carrying amount of other equity instrument investments, share capital, capital reserves, other payables, and other comprehensive income presented in the 2020 financial statements of the 21% equity interest has been fully and appropriately audited, and it is not possible to determine whether it is necessary to adjust these amounts.
*: Environmental Wisdom Finance and Taxation Law.
Author: Dong Lei.
*Editor: Mu Lin Financial News.