Notice on the Administration of Individual Income Tax on Equity Transfer Income was jointly released by the Beijing Municipal Taxation Bureau of the State Taxation Administration and the Beijing Municipal Administration for Market Regulation on 28 July 2021. Pursuant to this Notice, natural person shareholder of corporate enterprises or collective ownership (share cooperative) enterprise (hereinafter referred to as the "invested enterprise") applying for change registration of equity transfers shall arrange the tax declaration with the competent tax authority where the invested enterprise is located, and then go to the market regulation department for equity change registration from 1 September 2021. After the tax payment (tax declaration) is completed, the market entity registration authority shall handle the registration of equity change in accordance with the law.

Below are Q&As in relation to individual income tax on equity transfer income for clients’ reference.

Q:	What kind of behaviours could be regarded as equity transfer?
A:	1. Sale of shares; 2. Repurchase of shares by the Company; 3. Sales of shares by the shareholder of the invested company by way of public offerings during the IPOs; 4. Equity transfer forced by judicial or administrative authorities; 5. Outbound investment or other non-monetary transactions; 6. Settlement of debts by equity; 7. Other equity transfers.
Q:	How to calculate individual income tax involved in the transfer of equity by an individual?
A:	Taxable Income = Equity Transfer Income – Original Value of the Equity – Reasonable Expense Tax Payable= Taxable Income * 20%
Q:	How to determine equity transfer income?
A:	Equity transfer income refers to the cash, in-kind, marketable securities and other forms of economic benefits obtained by the transferor from equity transfer. The transferor's acquisition of various funds related to the equity transfer, including liquidated damages, compensation, and other named funds, assets, and rights, shall be incorporated into the equity transfer income. Subsequent income received by the transferor after meeting the agreed conditions in accordance with contract shall be regarded as income from the equity transfer.
Q:	How to determine the original value of equity transfer?
A:	1. For equity acquired by means of cash contribution, the original value of equity shall be the total of the actual price paid and the reasonable taxes directly related to the acquired equity; 2. For equity acquired by means of non-monetary asset contribution, the original value of the equity shall be the total of the non-monetary asset price at the time of investment and the reasonable taxes directly related to the acquisition of equity recognized or approved by the tax authority; 3. If the equity is acquired through gratuitous transfer, the original value of the equity shall be the total of the reasonable taxes and fees incurred on the acquisition of the equity and the original value of the former owner’s equity; 4. If the invested enterprise converts capital reserve, surplus reserve, and undistributed profit into share capital, and individual shareholders have paid individual income tax in accordance with the law, the original value of the newly converted share capital shall be the total of increased capital amount and relevant taxes; 5. Except for the above circumstances, the competent tax authority shall reasonably determine the original value of the equity in accordance with the principle of double tax avoidance.
Q:	How to declare and pay individual income tax for income from equity transfer?
A:	The equity transferor is the taxpayer and the transferee is the withholding agent. The transferee, whether it is an enterprise or a natural person, should earnestly perform its tax withholding obligations in accordance with the Individual Income Tax Law.
Q:	How to determine the competent tax authority for individual equity transfer?
A:	The tax authority in charge of individual income tax for the transfer of equity held by natural person is the local tax authority where the invested enterprise is located. In other words, taxpayers with income from equity transfers need to file tax returns at the location of the invested company.
Q:	How to determine the timing for equity transfer related individual income tax declaration?
A:	Individual income tax involved in equity transfer shall be declared within the 15th day of the following month after the equity transfer occurs.
Q:	If the equity transfer income is settled in currency other than RMB, it should be converted into equivalent RMB by adopting stipulated exchange rate. How to determine the exchange rate?
A:	If the equity transfer income is settled in currency other than RMB, the taxable income shall be converted into RMB according to the RMB exchange rate on the date of settlement published by SAFE.