Undistributed Profits Increase To Natural Persons Equity Tax

The second inspection bureau of the Shenzhen Local Taxation Bureau found that when the tax inspection was carried out on a high-tech enterprise in the jurisdiction, the enterprise found that there was an illegal act of pferring the undistributed profit to the individual shareholder's capital stock and failing to pay the personal income tax according to the regulations, and finally made a decision on the tax treatment punishment for ordering it to pay more than 220 yuan in taxes and impose a fine of more than 110 yuan.

It has been verified that the enterprise is in urgent need of increasing the registered capital to 10 million yuan because of the need of bidding. Because the shareholders' own funds are insufficient, the company's accounts do not have enough undistributed profits, so the company entrusts an accounting firm to issue false audit reports and capital verification reports, compose shareholder resolutions and articles of association, and increase capital by means of profits increasing capital.

To facilitate processing, the company will also change its business address from Futian District to Longgang District, and then move back to Futian District after the capital increase is completed.

In terms of accounting, by September 2010, when there was an undistributed profit of about 8300000 yuan, the company made an increase of 9 million yuan in the paid in capital, accounting for the remaining 700 thousand yuan.

According to the tax law, the above individual shareholders increase profits.

To form profit distribution from enterprises, individual income tax shall be levied on the basis of "interest, dividends and bonus" items, and shall be withheld by enterprises.

The second inspection bureau of the Shenzhen Local Taxation Bureau has served the company's notice of the time limit for tax withholding, and ordered it to pay the above personal income tax for more than 160 yuan.

In addition to the above problems, the company also has to pay cash dividends, dividends, dividends and bonuses to employees and deduct the personal income tax of nearly 600 thousand yuan.

The tax authorities have made a decision on the tax treatment and punishment of more than 220 yuan of personal income tax and a fine of more than 110 yuan.

Tax official's statement

According to the relevant provisions of the "People's Republic of China personal income tax law" and its implementation regulations, the Circular of the State Administration of Taxation on the pfer of individual income tax by the joint-stock enterprises and the issuance of bonus shares (No. 198 of national tax [1997]) and the relevant provisions of the state Administration of Taxation on the collection of personal income tax on the registered capital of surplus Provident Fund (National Tax Letter No. 1998, No. 333), the individual shareholders shall be reinvested in the company (the registered capital), and the personal income tax shall be levied according to the items of interest, dividends and bonuses. The Limited by Share Ltd shall approve the increase of capital in the relevant departments, and the resolution of the company's shareholders' meeting shall be withheld by the descendants.

In this case, the company's share pfer to individual shareholders in the form of profit distribution is actually the process of distributing dividends and dividends to shareholders and increasing the registered capital by dividends and dividends.

The personal income tax involved in this case is in essence

The taxation of dividends and bonus income obtained by way of dividends will be generated when the enterprises concerned have completed the accounting treatment of business registration and capital increase.

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Personal income tax, which is derived from dividends and dividends, is an important means to regulate income distribution and to organize financial revenue.

As long as there is a de facto profit distribution, tax obligations will occur, and dividends and dividends are not required to enter shareholders' accounts in cash.

Therefore, it is not feasible for individual shareholders to avoid personal income tax through non cash distribution.

For example, the Ministry of finance, State Administration of Taxation, stipulates the regulation on the collection and management of personal income tax of individual investors (tax [2003] 158). The first provision stipulates that personal income tax should be levied on the expenses of enterprises, family members and their related personnel who have nothing to do with the production and operation of enterprises, such as consumer spending and purchase of automobiles, housing and other property expenditures.

The second article of this notice stipulates that the individual investor borrows from the enterprise (exclusive sole proprietorship or partnership) in the year of tax payment, neither return nor used in the enterprise production and operation after the end of the tax year. The non returned loan can be regarded as the dividend distribution of the enterprise to individual investors and the individual income tax according to the item "interest, dividends and dividends".