The enterprise income tax that foreign shareholders need to pay when transferring their shares to domestic institutions or individuals can be divided into general tax treatment and special tax treatment. Generally speaking, tax treatment is applicable to equity transfer with cash or other non-monetary assets (except equity) as the consideration for equity transfer. If the equity transferee pays the equity transfer price with the equity of the company or its holding company as the consideration, the equity transfer can enjoy special tax treatment. (1) General tax treatment. Shareholders of overseas institutions usually need to pay 10% enterprise income tax in accordance with the provisions of the enterprise income tax law and its implementing regulations on the income from equity transfer obtained by transferring their shares to domestic enterprises or individuals. Income from equity transfer of foreign natural person shareholders shall be subject to 20% personal income tax in accordance with the provisions of the Individual Income Tax Law. When the tax treatment conditions stipulated in the tax treaty are more favorable than those stipulated in the enterprise income tax law, the provisions of the tax treaty can be applied first. For example, the Arrangement on Avoidance of Double Taxation and Prevention of Fiscal Evasion on Income signed by the Mainland and the Hong Kong Special Administrative Region stipulates that if a Hong Kong investor does not directly or indirectly hold 25% or more of the equity of the transferred enterprise in the Mainland 12 months before the transfer, the income obtained by the Hong Kong investor from the transfer of its equity of the invested enterprise in the Mainland will not be taxed in the Mainland. Foreign shareholders need to apply to the competent tax authorities in China, and only after approval can they enjoy the preferential tax treatment in the tax treaty. (2) Special tax treatment. In essence, the special tax treatment is to allow the counterparty to postpone tax payment, rather than exempt from tax payment. If the equity transferee pays the equity transfer price with the equity of the company or its holding company as the consideration, the equity transfer may need special tax treatment, that is, the income (or loss) is not recognized temporarily when the equity transfer transaction occurs, and the equity transferor does not bear the tax obligation. Under normal circumstances, the tax liability will be deferred until the relevant restructured assets are disposed of again. In addition, special tax treatment is currently only applicable to enterprises, not to the equity transfer of natural person shareholders. According to the Notice of the Ministry of Finance of People's Republic of China (PRC), State Taxation Administration of The People's Republic of China, on Several Issues Concerning Tax Treatment of Enterprise Reorganization (Caishui [2009] No.59), when transferring the equity of a foreign-invested enterprise to a domestic enterprise, a foreign investor must meet the following conditions before special tax treatment can be applied. First of all, there must be a reasonable business purpose, the main purpose is not to reduce, exempt or delay the payment of taxes; Second, the acquired equity is not less than 75% of the original equity of the acquired enterprise; Third, the original substantive business activities of the restructured assets will not be changed within 12 months after the establishment of the enterprise wing; Fourth, the amount of equity payment in the consideration of equity transfer is not less than 85% of the total transaction payment; Fifth, the original major shareholder who has obtained equity payment in the enterprise reorganization shall not transfer the acquired equity within 12 months after the reorganization. Since enterprises are involved in equity and asset acquisition transactions between China and overseas, they should meet the following conditions before choosing to apply special tax treatment provisions: ① A non-resident enterprise transfers its equity of a resident enterprise to another non-resident enterprise directly controlled by it at 65,438+000%, and the income from the equity transfer will not change in the future, and the non-resident enterprise of the transferor has made a written commitment to the competent tax authorities for three years (including three years). ② A non-resident enterprise transfers its equity of another resident enterprise to a resident enterprise whose direct holding relationship is 100%; (3) A resident enterprise invests its assets or equity in a non-resident enterprise directly controlled by it 100%. According to the Interim Provisions of the Ministry of Commerce on the Equity Contribution of Foreign-invested Enterprises and the Measures for the Administration of the Registration of Equity Contribution, foreign investors can set up foreign-invested enterprises or subscribe for foreign-invested enterprises to increase their capital with the equity of their enterprises in China as their capital contribution (including new establishment or capital increase). From the perspective of transaction approval and registration, the cross-border share swap under the above model is also justified.