Q：
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Under what circumstances is it necessary to verify the income from equity transfer?
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A：
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The declared equity transfer income is significantly low and without justifiable reasons.
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Failure to file tax returns within the prescribed time limit, and failure to do so after being ordered by the tax authorities to do so within the prescribed time limit.
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The transferor is unable to provide or refuses to provide relevant information on the income from equity transfer.
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Other situations where the income from equity transfer should be verified.
There are four situations where the equity transfer income declared by taxpayers is significantly lower, and the competent tax authorities can verify the equity transfer income. This is mainly a tax protection measure implemented against taxpayers who violate the principle of fair dealing or do not cooperate with tax management.
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Q：
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In what situations would equity transfer income declared by taxpayers be consider as significantly lower?
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A：
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If one of the following situations is met, it is considered that the income from equity transfer is significantly low:
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The declared equity transfer income is lower than the corresponding equity share of the net assets. Among them, if the invested enterprise owns land use rights, houses, unsold properties, intellectual property rights, exploration rights, mining rights, equity and other assets of the real estate enterprise, and the declared equity transfer income is lower than the fair value share of the corresponding net assets of the equity.
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The declared equity transfer income is lower than the initial investment cost or the price paid for acquiring the equity and related taxes.
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The declared income from equity transfer is lower than the income from equity transfer to the same shareholder or other shareholders of the same enterprise under the same or similar conditions.
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The declared equity transfer income is lower than the equity transfer income of enterprises in the same industry under the same or similar conditions.
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Unreasonable free transfer of equity or shares.
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Other situations considered by the competent tax authority.
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Q：
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In the process of individual equity transfer, in which cases is the taxpayer's equity transfer income significantly low but considered justifiable?
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A：
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If one of the following conditions is met, the income from equity transfer is significantly lower, but it is considered to have legitimate reasons:
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Can provide valid documents to prove that the invested enterprise has been significantly affected in production and operation due to national policy adjustments, resulting in the transfer of equity at a low price.
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Inherit or transfer the equity to one’s spouse, parents, children, grandparents, grandchildren, siblings who can provide legal proof of identity relationship, as well as the caregivers or supporters who bear the obligation to directly take care of or support the transferor.
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The internal transfer of equity held by employees of the company that cannot be transferred to external parties, as stipulated by relevant laws, government documents, or corporate articles of association, and with sufficient evidence to prove that the transfer price is reasonable and true.
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Other reasonable circumstances where both parties to the equity transfer can provide valid evidence to prove its rationality.
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Q：
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How should the original value of equity be determined when an individual acquires equity in the same invested enterprise multiple times?
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A：
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For individuals who acquire equity in the same invested enterprise multiple times, when transferring some of the equity, the "weighted average method" is used to determine the original value of their equity.
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Q：
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How should the transferred equity be converted into RMB when settled in a currency other than RMB?
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A：
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If the transferred equity is settled in a currency other than RMB, the taxable income shall be calculated by converting it into RMB at the middle rate of the RMB exchange rate on the settlement day.
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FAQ
