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those with Variable Interest Entity structures) –
have implemented equity-based compensation
plans but have not paid IIT as required.
In addition, the notice definitively confirms
that all listed companies will be responsible for
withholding and paying the IIT, regardless of
whether equity-based incentives are granted
directly or indirectly (such as through asset
management plans, trust plans, or offshore trusts)
to their employees.
Who should submit the
reporting form?
All companies that implement equity-based
compensation plans are required to submit
the Reporting Form as well as other materials
to the tax authorities in charge. If the company
implementing equity-based compensation plans
is not in the territory of China, the domestic
employer of the recipient of equity-based
incentives must take responsibility for filling in
and submitting the form.
What are the major changes China has tightened the tax
and potential impacts? administration of income
derived from equity-based
Previously, China only required listed companies compensation plans.
that implement a stock option plan to file the plan Companies that implement
and relevant materials with the tax authorities, equity-based compensation
according to the Notice on Issues relating to plans are now required to
the Levy of IIT on Personal Income from Stock submit a reporting form on the
Options (Cai Shui [2005] No.35). status of the equity incentives,
as well as other documents, to
Unlisted companies that grant equity-based the tax authorities in charge.
incentives to employees are only required If an overseas company grants
to complete filing formalities with the tax equity-based incentives to
authorities if they want to enjoy a deferred tax staff in the territory of China,
policy, according to the Notice on Improving the domestic employer will
IIT Policies Relating to Equity-Based Incentives need to comply with the filing
and Provisional of Technology in Exchange for requirements and withhold
Shareholding (Cai Shui [2016] No.101). the individual income tax on
income from equity incentives.
Now, based on the requirements of the new notice,
technically, all companies with equity-based SOUTH CHINA BUSINESS JOURNAL 4
compensation plans, listed or unlisted, need to file
with the tax authorities.
Businesses should be aware that under the new
rules, it may be easier for tax authorities to find out
that some overseas-listed companies – as well as
some companies with offshore structures (including
have implemented equity-based compensation
plans but have not paid IIT as required.
In addition, the notice definitively confirms
that all listed companies will be responsible for
withholding and paying the IIT, regardless of
whether equity-based incentives are granted
directly or indirectly (such as through asset
management plans, trust plans, or offshore trusts)
to their employees.
Who should submit the
reporting form?
All companies that implement equity-based
compensation plans are required to submit
the Reporting Form as well as other materials
to the tax authorities in charge. If the company
implementing equity-based compensation plans
is not in the territory of China, the domestic
employer of the recipient of equity-based
incentives must take responsibility for filling in
and submitting the form.
What are the major changes China has tightened the tax
and potential impacts? administration of income
derived from equity-based
Previously, China only required listed companies compensation plans.
that implement a stock option plan to file the plan Companies that implement
and relevant materials with the tax authorities, equity-based compensation
according to the Notice on Issues relating to plans are now required to
the Levy of IIT on Personal Income from Stock submit a reporting form on the
Options (Cai Shui [2005] No.35). status of the equity incentives,
as well as other documents, to
Unlisted companies that grant equity-based the tax authorities in charge.
incentives to employees are only required If an overseas company grants
to complete filing formalities with the tax equity-based incentives to
authorities if they want to enjoy a deferred tax staff in the territory of China,
policy, according to the Notice on Improving the domestic employer will
IIT Policies Relating to Equity-Based Incentives need to comply with the filing
and Provisional of Technology in Exchange for requirements and withhold
Shareholding (Cai Shui [2016] No.101). the individual income tax on
income from equity incentives.
Now, based on the requirements of the new notice,
technically, all companies with equity-based SOUTH CHINA BUSINESS JOURNAL 4
compensation plans, listed or unlisted, need to file
with the tax authorities.
Businesses should be aware that under the new
rules, it may be easier for tax authorities to find out
that some overseas-listed companies – as well as
some companies with offshore structures (including
