1. Current situation of individual income tax system
1. 1. The construction of private tax system is relatively backward.
Since the new fund law officially brought "non-public offering fund" into the regulatory framework in June 20 13, the private placement policy has ushered in a period of centralized implementation.
2065438+In February 2004, the Measures for the Registration of Private Fund Managers and Fund Filing (Trial) was implemented, and private fund managers and products began to go through the registration and filing procedures with the Association.
In August, the first management method specifically for private equity funds-Interim Measures for the Supervision and Management of Private Equity Funds was issued, which regulated private equity funds from eight aspects: registration and filing, qualified investors, fund raising, investment operation, industry self-discipline, supervision and management, special provisions for venture capital funds and legal responsibilities. The Interim Measures for the Supervision and Administration of Private Investment Funds, starting from the business dimension of private equity funds, puts forward that "these Measures shall apply to securities companies, fund management companies, futures companies and their subsidiaries engaged in private equity fund business".
In September, the CSRC solicited opinions on the Measures for the Management of Asset Management Business of Securities and Futures Operating Institutions (Draft for Comment), and stipulated the code of conduct for the development of pan-private asset management business from the institutional dimension (securities companies, fund management companies, futures companies and their legally established subsidiaries engaged in asset management business). With the registration of private placement and the establishment of qualified investors, private placement tends to be standardized; With the unification of private placement policy, the regulatory arbitrage problem of different types of private placement business tends to dissipate. However, there are still many problems to be clarified for private placements that have only recently turned positive, and the tax system is one of them.
At present, domestic private equity funds can be divided into private equity funds mainly investing in publicly traded securities, private equity funds mainly investing in non-publicly traded stocks and other private equity funds mainly investing in specific commodities such as art and wine, among which venture capital funds are regarded as a special category of private equity funds. According to the organizational form, domestic private equity funds can be divided into company system, limited partnership system and contract system according to the Measures for the Registration of Managers of Private Equity Funds and the Interim Measures for the Supervision and Management of Private Equity Funds.
Among them, in the contract system, domestic private equity funds often resort to channel forms, such as trust, brokerage asset management, fund accounts, fund subsidiaries, futures asset management and so on. After the implementation of the private placement registration system, the contractual private placement in the form of direct private placement began to appear.
However, in contrast to the rich types and channels of private placement, most tax systems related to private placement exist in a "point" way, and there is no unified tax framework covering all types of private placement. There are still many ambiguities in the tax system of private placement, such as there is no clear statement on the tax of direct private placement, and how different forms of private placement funds embody the principle of fairness in tax law. The construction of private placement tax system lags behind the system construction of managers and others.
1.2. Sorting out the current situation of individual income tax
At present, the taxes related to private equity funds are mainly income tax and business tax, and the business tax rate is relatively simple, while the policies related to income tax are more complicated, so this paper mainly sorts out the income tax. We focus on private equity investment funds and private equity funds, which can be divided into company system, limited partnership system and contract system according to organizational forms. Corporate private equity fund refers to an investment fund established in the form of a limited liability company or a joint stock limited company according to the relevant provisions of the Company Law, and the fund itself becomes an independent legal person. Its characteristics include reducing risks, having independent legal person status and applying some preferential tax policies. For private equity funds of enterprises, the main applicable laws are company law and enterprise income tax law.
Limited partnership private equity fund refers to the private equity fund established in the form of limited partnership. In 2006, the new Partnership Enterprise Law introduced the legal system of limited partnership, which provided a strong institutional guarantee for the development of private placement of limited partnership. The characteristics of limited partnership private equity fund mainly include: simple establishment procedure, penetrable taxation and no agency risk. For limited partnership private equity funds, the main applicable law is the partnership enterprise law.
Contractual private equity fund means that the investor of the fund signs a contract with the manager and entrusts the fund to the manager for management, which is essentially a trust relationship. Its characteristics are flexible establishment, withdrawal and financing mechanism, no repeated taxation and high decision-making efficiency. For contractual private equity funds, traditional private equity funds are mainly based on the provisions of various channels. For example, the China Banking Regulatory Commission issued the Operational Guidelines for Trust Companies' Private Equity Investment Trust Business, which regulates trust private equity funds, but there is no clear basis for direct private equity. The problem of personal income tax can be divided into two issues: one is the tax problem at the fund level; The second is the tax issue at the investor level.
Tax issues at the fund level
Among them, the tax problem at the fund level varies with the organizational form of private equity funds. Income from securities trading or securities trading by private equity funds of enterprises shall be taxed in accordance with the provisions of the enterprise income tax law, and income tax shall be calculated according to the income from property transfer and interest, with the tax rate of 25%.
As stipulated in Article 26 of the Enterprise Income Tax Law, the income from equity investment such as dividends and bonuses among eligible resident enterprises belongs to "tax-free income", and when the private equity fund of an enterprise obtains dividends and bonuses from the invested enterprise, it can be exempted from income tax. Among them, "dividends, bonuses and other equity investment income between qualified resident enterprises" refers to the investment income obtained by resident enterprises directly investing in other resident enterprises. In addition, there are special preferential tax policies for venture capital enterprises to engage in venture capital that the state needs to support and encourage. In 2007, People's Republic of China (PRC) Ministry of Finance State Taxation Administration of The People's Republic of China's Notice on Promoting the Development of Tax Policies for Venture Capital Enterprises (No.31), 2008 Regulations on the Implementation of Enterprise Income Tax Law and People's Republic of China (PRC) State Taxation Administration of The People's Republic of China's Notice on the Implementation of Income Tax Preferences for Venture Capital Enterprises in 2009 (Guo Shui Fa [2009] No.87) all had relevant preferential policies, among which No.87 proposed:
Venture capital enterprises have invested in unlisted small and medium-sized high-tech enterprises for more than 2 years (24 months) by means of equity investment. In line with the relevant conditions, the taxable income of venture capital enterprises can be deducted in the year of holding equity for 2 years. If the deduction is insufficient in the current year, it can be carried forward in future tax years.
Relevant conditions mainly refer to:
The business scope conforms to the Interim Measures for the Administration of Venture Capital Enterprises, and the industrial and commercial registration is a venture capital enterprise with professional legal person such as venture capital limited liability company and venture capital joint stock limited company, which conforms to the conditions and procedures stipulated in the Interim Measures. After filing, it is verified by the annual inspection of the filing management department that the investment operation conforms to the relevant provisions of the Interim Measures. Small and medium-sized high-tech enterprises invested by venture capital enterprises should not only be recognized as high-tech enterprises in accordance with the provisions of the Notice on Printing and Distributing the Administrative Measures for the Recognition of High-tech Enterprises and the Notice on Printing and Distributing the Administrative Guidelines for the Recognition of High-tech Enterprises issued by the Ministry of Science and Technology of the People's Republic of China and the Ministry of Finance of State Taxation Administration of The People's Republic of China, but also meet the requirements of no more than 500 employees, no more than 200 million yuan in annual sales (business) and no more than 200 million yuan in total assets. This means that the basic tax rate of enterprise private equity funds at the fund level is 25%, but they enjoy many preferential tax policies. For limited partnership private equity funds, according to Article 6 of the Partnership Enterprise Law: "The income from production and operation and other income of a partnership enterprise shall be paid by the partners in accordance with the relevant tax regulations of the state." Among them, partnerships include general partnerships and limited partnerships. This means that limited partnership private equity funds do not charge income tax at the fund level.
In the traditional contractual private equity funds, corporate entities such as brokerage asset management, trust, fund accounts, fund subsidiaries and futures asset management are not applicable to the enterprise income tax law, so it is naturally unnecessary to pay enterprise income tax at the fund level.
Tax issues at the investor level
The tax issue at the investor level is different because of the different attributes of investors. For natural person investors, according to the individual income tax law and its implementing regulations, those who invest in private equity funds of enterprises belong to ordinary natural person investors and are taxed according to "income from property transfer" or "income from interest, dividends and bonuses" at a tax rate of 20%.
If a natural person investor invests in a limited partnership private equity fund, according to the Provisions on the Collection of Individual Income Tax for Investors of Solely Owned Enterprises and Partnership Enterprises (Caishui [2000] No.91), the sole proprietorship enterprises and partnership enterprises shall stop collecting enterprise income tax. The total income of a sole proprietorship enterprise or partnership enterprise (hereinafter referred to as the enterprise) in each tax year shall be deducted from the costs, expenses and losses. As the income from the production and operation of individual investors, according to the taxable item of "income from the production and operation of individual industrial and commercial households" in the individual income tax law, the five-level excess progressive tax rate of 5% ~ 35% is applied to calculate and collect personal income tax. " But the partnership at that time mainly refers to the general partnership. The new "Partnership Enterprise Law" in 2007 allows a partnership to be established as a limited partnership, and puts forward that "the income from production and operation and other income of a partnership shall be taxed separately by the partners in accordance with the relevant tax regulations of the state". This means that private equity funds invested by natural persons with limited partnership are subject to personal income tax of 5%~35% according to the income from production and operation of individual industrial and commercial households.
From September of 20 1 1 year, when individual income tax is levied on the production and operation income of partnership investors, the expense deduction standard is uniformly determined to be 42,000 yuan/year. After deducting the expenses, according to the latest tax rate table, natural persons who invest in limited partnership private equity funds will be taxed at a reduced rate of 35% for the part exceeding 6,543,800 yuan.
However, as for the interest, dividends and bonuses returned by the partnership's foreign investment, according to the Notice of State Taxation Administration of The People's Republic of China City, People's Republic of China (PRC) on the Scope of Implementation (Guo [20065438+0] No.84), this part of income is not incorporated into the income of the partnership, but as the personal interest, dividends and bonuses of investors, and personal income tax is paid according to "interest, dividends and bonuses", that is, the tax rate is 20.
If a natural person investor invests in a contractual private equity fund, at present, contractual private equity funds such as trusts and securities firms do not withhold and remit the investor's income, and investors need to declare and pay taxes on their own. According to the "income from royalties", the tax rate of 20% applies.
For enterprise investors, according to Article 26 of the Enterprise Income Tax Law, "dividends, bonuses and other equity investment income between qualified resident enterprises are tax-free income". Therefore, if they invest in private equity funds of enterprises, the dividends, bonuses and other equity income distributed by their funds can be exempted from income tax. However, if an enterprise investor withdraws by transferring the shares of an enterprise private equity fund, it needs to pay enterprise income tax at the rate of 25%. If an enterprise investor invests in a limited partnership for private placement, according to the Notice of the Ministry of Finance, People's Republic of China (PRC) and State Taxation Administration of The People's Republic of China on the Income Tax of Partners in Partnership Enterprises (Caishui [2008] 159), and according to the principle of "distribution first, then tax payment", after the enterprise investor obtains the fund income, it will pay tax at the enterprise income tax rate of 25%.
Enterprise investors who invest in contractual private equity funds shall pay taxes at the enterprise income tax rate of 25% after obtaining the fund income.
However, the enterprise income tax law and related laws and regulations stipulate some tax-free and low-tax subjects, which can be tax-free or levied at preferential tax rates when obtaining fund income. For example:
Article 28 of the Enterprise Income Tax Law: Small and low-profit enterprises that meet the requirements shall be subject to enterprise income tax at a reduced rate of 20%. High-tech enterprises that need special support from the state shall be subject to enterprise income tax at a reduced rate of 15%.
The Notice of State Taxation Administration of The People's Republic of China, Ministry of Finance on Enterprise Income Tax Policies Concerning Supplementary Endowment Insurance and Supplementary Medical Insurance (Caishui [2009] No.27) stipulates that since June 5438+1 October/0/day, the supplementary endowment insurance premium (i.e. enterprise annuity) and supplementary medical insurance premium paid by enterprises for all employees of the enterprise shall not exceed 5% of the total wages of employees respectively. The excess shall not be deducted.
What needs to be added is that there was a wave of preferential policies when natural person investors participated in the private placement of limited partnerships. At that time, in order to encourage the development of private equity investment, most local governments taxed the limited partner tax rate (LP) of limited partnership private equity investment funds from 5% to 35% according to "interest, dividends and bonus income", and the tax rate was 20%; General partner (GP) is still taxed according to "income from production and operation of individual industrial and commercial households", and the tax rate is 5-35%. Some local governments will give preferential policies in the form of tax rebates.
However, from the perspective of tax law, governments at or below the provincial level should not have the right to directly reduce or exempt taxes without the approval of the financial department of the State Council. Therefore, the above-mentioned preferential policies of local governments are essentially on the edge of gray. In 2009, the Ministry of Finance and State Taxation Administration of The People's Republic of China issued the Notice on Resolutely Stopping Ultra vires tax reduction and exemption and strengthening tax administration according to law, requiring local financial and tax authorities not to change the scope of preferential tax policies without authorization, and making it clear that "the legislative power of central tax, tax enjoyment and local tax is centralized in the central government, except for the specific policy management power delegated to local governments according to relevant tax laws and administrative regulations".
2. Comparative analysis of individual income tax
2. Comparative analysis of organizational forms of1.
Generally speaking, corporate private equity funds have independent legal personality and operate relatively stably. Although there is a problem of "double taxation" at both the company level and the investor level, various preferential tax policies can partially offset the impact of double taxation. For example, when taxing at the company level, the dividends and bonuses of the invested enterprise can be exempted from tax according to law; Venture capital enterprises can deduct 70% of their investment in small and medium-sized high-tech enterprises in the year when they hold shares for 2 years.
Taxable income. When tax is levied at the investor level, if it is an enterprise investor, dividends, bonuses and other equity income distributed by the fund can be exempted from income tax. Therefore, the cumulative income tax burden of corporate private equity funds is the highest:
Natural person investor: 25%+( 1-25%)*20%=40%
Enterprise investors: 25%+( 1-25%)*25%=43.75%
But the actual tax burden is usually not that high. For example, corporate investors can get multiple tax benefits by investing in corporate private equity funds and private equity funds investing in small and medium-sized high-tech enterprises. For another example, suppose that the income of corporate investors from investing in corporate private equity funds is realized through dividends, bonuses and other equity income. In fact, the tax rate of corporate investors investing in corporate private equity funds and investing in limited partnership private equity funds is the same, both of which are 25% (regardless of other preferential policies). Although the limited partnership private equity fund has no legal person qualification, it can still be clearly registered in the property right, and the general partner can carry out the company affairs and bear unlimited joint and several liabilities for the debts of the partnership, which can effectively overcome the "principal-agent" problem under the company system, which is one of the important reasons why the limited partnership system has become the first choice for foreign private equity. The characteristics of the limited partnership "tax transparent body" determine that there is no need to pay taxes at the fund level, and the partners pay taxes separately. Among them, natural person investors generally pay taxes at an excessive progressive tax rate of 5%~35%, while enterprise investors generally pay taxes at 25% (except for low tax rate and tax-exempt subjects). Previously, in order to encourage equity investment, some local governments reduced the tax rate of natural person limited partners in private equity investment to 20%. Therefore, the cumulative income tax burden of limited partnership private equity funds is the highest:
Natural person investor: 0+5%~35%=35%
Enterprise investors: 0+25%=25%
However, due to the flexibility of limited partnership in income distribution and the characteristics of "tax transparent body", the private placement of limited partnership has strong maneuverability in tax arrangement, which can theoretically transfer the income from "heavy tax subject" to "light tax subject". In order to prevent the limited partnership from becoming a tax avoidance tool for private placement, the Notice of the Ministry of Finance on the Income Tax of Partners in Partnership Enterprises in State Taxation Administration of The People's Republic of China, People's Republic of China (PRC) (Caishui [2008] 159) requires that the income of partnership enterprises, whether distributed or retained, should be paid as "all production and operation income and other income".
There is no clear statement about contractual private placement in China, but the traditional private placement through trust, brokerage and other channels can be regarded as the embryonic form of contractual private placement. Private placement by contract is the most convenient way to set up a company or limited partnership. Because there is no constraint of companies or limited partnership entities, contractual private placement is the most flexible in raising funds, and it can raise funds many times. Because there is no entity, existing contractual private placements such as trusts and brokerage asset management do not need to pay taxes at the fund level.
At the investor level, natural person investors pay taxes at the rate of 20%, and legal person investors pay taxes at the rate of 25%. Thus, the cumulative income tax burden of contractual private equity funds is the highest:
Natural person investor: 0+20%=20%
Enterprise investors: 0+25%=25%
2.2. Blackstone tax case storm
It is worth noting that, except for some preferential policies issued by the local governments mentioned above, which can be targeted at limited partnership private equity funds, in the venture capital field where national and local preferential policies are most intensive, most policies are only targeted at corporate private equity funds. This is closely related to the fact that limited partnerships can easily evolve into tax avoidance tools. In countries with mature private equity, such as the United States, it is reported that limited partnership in private equity investment has controlled 80% of venture capital. In the United States, limited partnership private placement does not need to pay taxes at the level of private equity funds, but only at the partner link. If the partner is a natural person, the tax shall be paid directly in accordance with the individual income tax regulations; If the partner is an enterprise, the income will be distributed to the final taxpayer's account for tax payment, which is the so-called "running water principle".
Taxable income in the United States is divided into ordinary income, capital gains and negative income, of which the first two are the main taxable income. Ordinary income is subject to excessive progressive tax rate, with a maximum of 35%. Capital gains include all kinds of investment income, and the highest tax rate is only 15% (the government is pushing to increase it to 20%).
According to the principle of "flowing through", private equity funds in the form of limited partnership only need to pay capital gains tax with lower tax rate in the investor link; Private equity funds in the form of corporate organization have to pay the highest federal income tax of 35% and state tax of 10% in the fund link, and also pay taxes in the investor link. Therefore, most private equity funds choose limited partnership. Blackstone Group is currently one of the largest private equity funds in the world. When listing, the partnership structure was suspected of tax avoidance, which caused quite a storm.
In June 2007, Blackstone Group was listed on the new york Stock Exchange. The listed entity is Blackstone Group Limited Liability Company (hereinafter referred to as "Blackstone Group Limited Liability Company"), a limited partnership registered in Delaware. The listed entity has two types of investors:
As a general partner of a listed entity, Blackstone Group Management Co., Ltd. has no economic benefits. The company is actually controlled by Blackstone executives represented by founders Schwarczman and Peterson.
The investors in this issue get ordinary units. As the limited partners of the listed entity, they enjoy the economic rights of the listed entity 100%, but they only have limited voting rights and have no right to elect the general partners and directors of the listed entity.
The listed entity indirectly controls each of the five operating entities through four general partners (Blackstone Holdings General Partner Company) holding 65,438+0,000%, holding 265,438+0.7%. The four general partners of Blackstone Holdings are all general partners in the five operating entities.
In addition, Blackstone's senior management team also holds 78.3% of the shares of five operating entities as limited partners, and 65,438+000% of listed entities can be converted into ordinary fund units.
Through complex structural design, Blackstone's senior management team not only raised funds without losing control, but also obtained a lower tax rate of 15% in the form of limited partnership.
However, after Blackstone went public, its shares gained high liquidity and were closer to legal entities in essence. At this time, we still enjoy the penetrating tax system and the low tax rate of 15%, which has caused a lot of controversy.
3. How to pay taxes for direct private placement?
Since the implementation of private registration system in February 20 14, direct private placement products have become the focus of attention in the industry. Compared with channel private placement products, direct private placement can not only save channel fees and enhance the popularity of private placement companies, but also help private placement companies to establish a relatively perfect front, middle and back office mechanism to guide the development and standardization of private placement companies. However, the problem of how to pay taxes on direct private placement is still in a vague stage. Because there is no unified and clear statement, some private placements are worried that direct private placement products will face the embarrassing situation of "double taxation" in the future, so they hold a wait-and-see attitude towards direct private placement.
Compared with traditional channel private equity funds, direct investment private equity is a standard contractual private equity, so the discussion on whether direct investment private equity needs to pay taxes is essentially a discussion on whether contractual private equity needs to pay taxes. At present, the mainstream views in this regard are divided into two factions:
Non-entity tax model. It is believed that contractual private placement is not an independent industrial and commercial subject, but a collection of investors and a contractual relationship. Therefore, the non-entity tax model holds that contractual private placement does not need to pay taxes at the fund level, but only at the investor level.
Entity taxation mode. It is believed that there are two levels of legal relations in the operation of contractual private placement, one is that the fund manager uses funds to invest, and the other is the collection and distribution between the fund manager and the fund holder. Because they are two kinds of legal acts, they need to fulfill their tax obligations separately. At the fund level, laws, regulations and tax systems related to investment should be applied; At the investor level, laws, regulations and tax systems related to income should be applied.
But as mentioned above, we believe that the current channel private placement products belong to the embryonic form of domestic contractual private placement. Therefore, direct private placement products will refer to the original channel private placement products, and investors do not need to pay taxes for fund products, but pay taxes separately.
In addition, as a mature contractual fund system, Public Offering of Fund currently enjoys some preferential policies. 20 13 June, the new Securities Investment Fund Law brought private equity funds into the regulatory framework. Accordingly, the relevant preferential tax policies that used to apply to public equity funds should also apply to direct private equity funds. According to the Notice of the Ministry of Finance of State Taxation Administration of The People's Republic of China on Some Preferential Policies for Enterprise Income Tax (Caishui [2008] 1No.), the preferential policies for encouraging the development of securities investment funds are put forward:
(1) The income obtained by securities investment funds from the securities market, including the price difference income from buying and selling stocks and bonds, dividend income from equity, interest income from bonds and other income, will not be levied for the time being.
(2) No enterprise income tax is levied on the income obtained by investors from the distribution of securities investment funds.
(3) No enterprise income tax will be levied on the difference income of securities investment fund managers who use funds to buy and sell stocks and bonds.
If private placement can enjoy the current preferential tax policies for public offering, it can also realize that fund products are not taxed.
However, due to the use of the word "temporary non-collection" in the Notice of the Ministry of Finance of State Taxation Administration of The People's Republic of China on Some Preferential Policies for Enterprise Income Tax, it means that China may think that contractual funds should adopt the "entity tax model", but it will not be collected at present to encourage the development of contractual funds, which will increase the uncertainty of the tax system for direct private placement in the future.