Let's move on to the advice we give in these situations:
Iv. Relevant suggestions
For a company, a shareholder shall pay individual income tax on interest, dividend and bonus when receiving dividends, and a shareholder shall pay individual income tax on income from property transfer when transferring the company's equity (or reducing the capital of the shareholder or liquidating the company). As for the partnership, the partners do not need to pay individual income tax on interest, dividends and bonuses when the partnership distributes dividends, but the partners shall pay individual income tax on the transfer of partnership property shares. As the current tax policy is not perfect, according to the current policy operation, the transfer of partners' property shares is likely to result in repeated collection of individual income tax. It is obviously not in line with the spirit of the tax law to tax the same income twice, so it is necessary to adjust the current tax policy. In practice, there are several solutions as follows:
Scheme 1: After the partner transfers the share of property, the taxable cost of the partnership assets shall be adjusted synchronously according to the transfer price to ensure that the total tax burden remains unchanged.
Plan one seems feasible, but in practice it is difficult to operate. How does a partnership adjust its taxable costs for hundreds of assets? Moreover, the assessable cost must be adjusted according to the proportion of property shares (the assets corresponding to the untransferred shares cannot be adjusted for the assessable cost), and the assessable cost after adjustment is only linked to the new partner (transferee). The difference between the assessable cost and the accounting cost is a huge amount of work, which is indeed impossible to operate, so it is not feasible.
Scheme 2: After the partner transfers the share of property and pays the individual income tax, the individual income tax paid by the new partner (the assignee) shall be deducted at the time of tax payment (regarded as the individual income tax actually paid by the new partner in advance).
Scheme 2 has strong operability, but there is also the problem of tax injustice between the seller and the buyer: the seller pays20%The personal income tax on the property transfer income is paid by the buyer5%-35%Production and operation income tax, the actual tax burden is bound to be different. The second solution solves the problem of the unchanged total tax burden (Note: if the partnership continues to lose money after the transfer of property shares, it may not solve the problem of the unchanged total tax burden, but this is inevitable), but it does not solve the problem of the tax burden transfer between the buyer and the seller to a certain extent.
Scheme 3: If the price of the property share transferred is higher than the initial investment cost (tax cost) of the seller, the higher part shall be allowed to be deducted by the new partner (the assignee) when calculating the income from production and operation (if there is still a balance of deduction in the current year, it shall be carried forward to the following year indefinitely); If the price of the transferred share of property is lower than the initial investment cost of the seller (tax cost), then the lower part can be treated without any treatment (it can be regarded as the loss of the transferor to the assignee to make up for), or the assignee can wait until the partnership is closed and liquidated, and make up for the personal income tax by one-time accounting of the liquidation income (make up for the gain, but the overall loss is still not covered).
Scheme 3 also has strong operability, and there is no tax burden transfer problem, the author suggests that Scheme 3 be adopted temporarily.
V. Policy discussion
It is not difficult for us to see that for the transfer of partnership property shares by partners, only from the perspective of the seller, the partners can take advantage of the current policy to avoid paying the individual income tax on production and operation and instead pay the individual income tax on the transfer of property, which is actually a loophole in the tax law.
Before the introduction of the new Individual Income Tax Law, the author always believed that the transfer of partnership property shares by partners should be subject to individual income tax based on the income from production and operation (at the same time, double taxation should be avoided), so as to prevent the difference of tax burden between buyers and sellers and maintain continuity and fairness. The new individual income tax law may be considered from the perspective of partnership: the partner's individual income tax is based on the book profit (income) of the partnership. When the partnership has not realized the income, it is not appropriate to levy individual income tax on the partners according to the production and operation income tax, so the provision is to levy individual income tax on the income from the transfer of property.
Recently, some changes have taken place in the author's thoughts: for individuals, income from property transfer and income from production and operation can be converted into each other, and taxpayers should be able to carry out necessary tax planning according to their actual situation under the premise of legal, so as to choose the tax burden offset.
Vi. Tax planning
The result of current tax policy is double taxation (the overall tax burden is likely to rise) of partners transferring their share of partnership property. However, the author believes that if the tax policy can be legally and reasonably used, it can also produce the effect of tax saving (overall tax burden reduction). It should be noted that the tax planning scheme that harms the interests of others cannot be established. Whether the tax planning is established must be based on the premise that the overall tax burden is reduced. Interested financial personnel can contact us to discuss together.
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