Question:
In the shareholding structure of Bell Electric, if there are company partners among the partners of Jishun Assets (Limited Partnership). Then, how should the company's partners deal with tax issues in the process of transferring capital to Bell Electric?
Answer:
(1) When Xiao Xiong Electric uses capital reserve-capital premium to increase capital, the company partners of Jishun Assets do not pay taxes;
(2) When Xiao Xiong's capital reserve-other capital reserve is converted into share capital, whether the partners of Jishun Assets pay taxes is not clearly stipulated in the current tax policy;
(3) When Xiao Xiong Electric uses retained earnings (surplus reserves and undistributed profits) for capital increase, the company partners of Jishun Assets are included in the taxable income according to the distribution ratio. The reason is that the dividend exemption policy among resident enterprises stipulated in Article 26 of the Enterprise Income Tax Law is aimed at enterprises with direct shareholding. However, the company partners in Jishun Assets indirectly hold the equity of Bell Electric, so they cannot enjoy tax-free treatment.
The following is the text.
Judgment rules and tax treatment of clearing stocks and real debts
Real debt with clear shares (also called real debt with clear shares) is not a legal concept. Generally, it refers to the financing method in which investors invest in the name of equity, and finally realize the withdrawal of capital preservation by agreeing on terms such as rigid redemption and fixed income.
At present, the real debt with clear equity has become a very common financing method, which has the advantages of optimizing financial statements, bypassing the qualification limit of lending and not occupying the credit line of enterprises.
China Asset Management Association issued "No.4 Record Management Standard of Private Equity Management Plan of Securities and Futures Operating Institutions", which divided the real debt of Ming shares into repurchase, third-party acquisition, regular dividend distribution, gambling and other common modes.
The author thinks that gambling should not be regarded as the real debt of stocks, because the real debt of stocks will definitely be taken away by investors in the future, and there is no intention of holding shares for a long time; In gambling, whether the investor withdraws depends on whether the financing party meets the agreed performance conditions.
Readers interested in gambling can refer to the article Legal Nature and Tax Treatment of Gambling Agreements.
I. Judicial rules
According to Article 7 1 of Nine People's Minutes and Articles 68 and 69 of the Supreme People's Court's Provisions on the Application of Certain Issues on the Interpretation of Guarantee System, the court shall follow the following adjudication rules for cases with clear equity and true creditor's rights:
(1) The agreement on clearing shares and paying debts is valid;
(2) The real debt of clear shares belongs to the guarantee of equity transfer, and the nominal shareholders have the priority to be compensated for the transferred equity;
(3) If the creditors of the target company request the nominal shareholders to bear joint liability on the grounds that the shareholders have not (completely) fulfilled their capital contribution obligations or withdrawn their capital contribution, the court will not support it.
According to relevant laws and judicial interpretations, the following inferences can be made.
(1) Nominal shareholders have no shareholder rights, neither property rights nor membership rights.
(2) If the nominal shareholder disposes of the equity as a shareholder, the law should also protect the trust interests of the bona fide third party.
Two. Tax treatment rules
Law has the logic of law, and taxation has the logic of taxation. Even if an investment is recognized as a real debt by the judicial authorities, it must be evaluated by the tax law to determine whether it can be treated as a debt investment.
(A) the definition of shares and real debt is clearly defined in the tax law.
In the tax law, the real debt of Ming shares is called mixed investment (with dual characteristics of rights and interests). According to Announcement No.41No.2013 of State Taxation Administration of The People's Republic of China, People's Republic of China (PRC) (hereinafter referred to as Announcement No.41), mixed investment businesses that meet the following conditions at the same time shall be regarded as creditor's rights investment and pay enterprise income tax.
(1) After the invested enterprise accepts the investment, it needs to pay the interest regularly according to the interest rate agreed in the investment contract or agreement (or pay the principal-guaranteed interest, fixed profit and fixed dividend regularly, the same below);
(2) The invested enterprise needs to redeem the investment or repay the principal after the investment expires or the specific investment conditions are met;
(3) The investing enterprise does not own the net assets of the invested enterprise.
(4) Investment enterprises have no right to vote and stand for election;
(5) The investing enterprise does not participate in the daily production and operation activities of the invested enterprise.
On the contrary, for mixed investment businesses that do not meet the above five conditions at the same time, corporate income tax will be treated as equity investment.
(2) Tax treatment
(1) Tax treatment of debt investment
If the five situations specified in the announcement. 4 1 When both are satisfied, the real debt of Ming shares shall be treated as debt investment:
Investment enterprises should pay value-added tax on sales with all interest and interest-based income. On the day when the invested enterprise pays the interest, the investment enterprise recognizes the income and counts it into the taxable income of the current period.
The invested enterprise shall confirm the interest expense on the date when the interest is payable, and the part of the interest expense that does not exceed the amount calculated according to the similar loan interest rate of the financial enterprise in the same period may be deducted before the enterprise income tax.
At the time of share repurchase, the difference between the repurchase price and the investment cost is recognized as the current profit and loss and included in the current taxable income.
(2) Tax treatment of equity investment.
If the clear shares and real debts cannot meet the five conditions of the announcement. 4 1 At the same time, tax treatment should be carried out according to equity investment:
Interest earned by an investment enterprise (including income of interest nature) that meets the conditions stipulated in Article 26 of the Enterprise Income Tax Law is recognized as "dividend income" and can enjoy tax exemption.
The interest paid by the invested enterprise shall be regarded as dividends to the invested enterprise and shall not be deducted before tax.
When the invested enterprise repurchases its equity, it shall withdraw its investment as a shareholder. According to People's Republic of China (PRC) State Taxation Administration of The People's Republic of China Announcement No.34 (20 1 1), when an investment enterprise withdraws its investment from the invested enterprise, the part of its assets equivalent to the initial investment shall be recognized as investment recovery; The part equivalent to the accumulated undistributed profits and accumulated surplus reserves of the invested enterprise, which reduces the proportion of paid-in capital, is recognized as dividend income; The rest is recognized as investment asset transfer income.
Three. Problems existing in current tax treatment rules
From the economic essence, it is more reasonable to define "clear shares and real debts" as debt investment. Announcement No.4 1 respects the economic essence of the real debt of Ming shares to a certain extent, and determines the income obtained by the invested enterprise as interest income. The interest expense of the invested enterprise is allowed to be deducted before tax, but its application in practice is very limited. The main reasons are:
(1) has a narrow scope of application.
Judging from the specific provisions of AnnouncementNo. 10 of 1999, 4 1 is only applicable to the situation between the investing enterprise and the invested enterprise, not to the third-party repurchase. For example, the shareholders of the invested enterprise buy back shares.
(2) The applicable conditions are too harsh.
The tax treatment rules for debt investment can only be applied to investments with clear equity and debt in essence, and meet the five conditions stipulated in Announcement 12. 4 1. However, in reality, it is rare that the real debt of Ming shares fully meets the announcement number. 4 1.
For example, the invested enterprise usually does not pay interest, and repurchases the equity at one time after the expiration; The investment enterprise takes over the seal of the invested enterprise and sends financial personnel; In order to control risks, investment enterprises limit the liabilities of invested enterprises or invest in high-risk businesses, and so on. It is possible that the tax treatment rules for debt investment cannot be applied because the conditions stipulated in Announcement 4 1 are not fully met.
It is expected that State Taxation Administration of The People's Republic of China will further supplement and improve Announcement No.41.