Article 4 of "Document 140" clearly stipulates that "the manager of the asset management product is the VAT taxpayer of the VAT taxable behavior occurring during the operation of the asset management product". In other words, if my son has taxable behavior, I will pay taxes.
For contractual private equity funds, there is no tax, but the value-added tax needs to be paid by the private equity fund manager; For limited partnership and corporate private equity funds, the value-added tax is paid by the partnership or company behind it.
How do private equity funds pay VAT?
Shopping in the supermarket requires consumption tax, and buying a car and a house requires purchase tax. Shopping in the supermarket here, buying a car and buying a house are all so-called taxable behaviors. The new document also stipulates the taxable behavior of private fund managers.
To put it simply, private equity fund means that customers give money to fund managers, who buy and sell investment products such as stocks in the secondary market, and then return the investment income to investors after deducting fixed management fees and performance rewards.
There are two kinds of taxable behaviors: buying and selling stocks (if there is interest income from buying and selling bonds, it is also a taxable behavior, which will be discussed later) and management fees. The corresponding documents are financial commodity transfer and direct charge financial services.
Financial commodity transfer
The transfer of financial commodities is well understood, that is, the act of buying and selling securities, foreign exchange and financial derivatives. Value-added tax needs to be paid on the income from buying and selling. The transaction mentioned here is based on the premise that it is not held until maturity.
Direct charge financial services
According to the document, "the so-called direct charging financial services refers to the business activities of providing related services for financial services and charging fees. These include providing services such as asset management, trust management and fund management. " The management fees charged by private fund managers are financial services directly collected, so value-added tax is also required.
Where are investors most concerned about?
Does the subscription and redemption of private equity funds belong to the transfer of financial commodities? Do I have to pay taxes, too
The transfer of financial goods mentioned in the document is at the level of private fund managers, partnerships and companies, while the application for redemption of funds by investors is entirely a personal act, which is a contractual act between investors and private fund managers, and does not belong to the transfer of financial goods, and does not need to pay VAT. If it is held until maturity, it does not need to be paid.
Will the payment of VAT by private equity funds affect our investment income?
First of all, you should remember that whether to pay value-added tax has nothing to do with equity or securities private equity funds, but only with investment targets and methods.
If it is a FOF type, if the investment target is an asset management product, it will be redeemed normally on the open day, and the redemption income generated by it does not need to pay VAT according to the transfer of financial goods. If the FOF sub-fund judges the value-added tax according to the investment situation, the FOF parent fund will generally not hold it until maturity, but adjust the fund pool according to the market trend. If held to maturity, the fund is generally non-guaranteed, so there is no need to pay VAT.
If it is an ordinary stock strategy private equity fund, there is no need to pay taxes if there is floating profit during the holding period. Because the floating profit of the stock only needs to pay value-added tax when it generates differential income. If you buy a private placement, you can go to the private placement network, which has no subscription fee.