Scenario

Company A (in China, as transferor) is the investor of Company Z (in China, as the target company), now transfer its equity to the Transferee

Mr. X (individual in China, as transferor) is the investor of Company Z (in China, as the target company), now transfer his equity to the Transferee

Company B (overseas, as transferor) is the investor of Company Z (in China, as the target company), now transfer its equity to the Transferee (Chinese Company C OR an overseas company D)

Mr. Y (as a foreign individual, as transferor) is the investor of Company Z (in China, as the target company), now transfer his equity to the Transferee (Chinese Company C OR overseas company D)

Income Tax

Tax Rate

• The standard tax rate as 25%;
• For qualified SMEs, as 20%
• For Hi-tech companies, as 15%

20%

10% as the withholding tax

20%

Who will withhold?

Company A will pay tax by itself

The transferee will withhold it and pay

• Chinese Company C, or;
• overseas company D

• Chinese Company C, or;
• overseas company D)

Where to pay?

The competent tax authority for the transferor’s registered address

The competent tax authority for the target company

• If the transferee is a Chinese Company C: the competent tax authority for Company C;
• If the transferee is an overseas company D: The competent tax authority for Company Z

• If the transferee is a Chinese Company C: the competent tax authority for Company C;
• If the transferee is an overseas company D: The competent tax authority for Company Z

When to pay?

Annual tax clearance

15 days within the next month from the equity transfer action

30 days within the execution of the agreement

30 days within the execution of the agreement

Stamp Duty

0.05% as for both transferor and transferee