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Q:
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Can only listed companies use equity incentives?
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A:
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Stock options, stock options, restricted stock and equity awards may also be granted to employees of the Company for non-public companies that meet the conditions.
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Q:
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How do employees of non-public companies file individual income tax returns for related stock option awards?
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A:
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The deferred tax policy can be implemented when the employee obtains the equity incentive by deferring the tax until the transfer of the equity is filed with the competent tax authority.
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Q:
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What are the requirements for non-public companies to benefit from the tax deferral policy?
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A:
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1.
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Equity Incentive Plans for Domestic Resident Enterprises;
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2.
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The share incentive plan is approved by the board of directors and the shareholders' (general) meeting of the company. State-owned units that do not have a shareholders' (large) meeting shall be approved by the higher authorities. Incentive plan should set out the purpose, target, target, validity period, various price determination methods, the conditions and procedures of the incentive object to obtain rights and interests, etc.;
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3.
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The subject of the incentive shall be the equity interest of the Company in a domestic resident enterprise. The subject of the incentive may be the equity obtained by investing the technical achievements into other domestic resident enterprises. The subject shares (rights) of the incentive shall include shares (rights) granted to the incentive target through issuance of additional shares, direct alienation by the majority shareholder and other reasonable methods permitted by laws and regulations;
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4.
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The incentive object shall be the technical backbone and senior management personnel decided by the board of directors or shareholders (general meeting), and the total number of incentive object shall not exceed 30% of the average number of the company's employees on duty in the last 6 months;
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5.
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Stock options shall be held for 3 years from the date of grant and 1 year from the date of grant; restricted stock shall be held for 3 years from the date of grant and 1 year from the date of release from lock-up; equity awards shall be held for 3 years from the date of award. The above time conditions must be set out in the equity incentive plan;
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6.
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Stock options may not exceed 10 years from the date of grant to the date of exercise;
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7.
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Neither the company implementing equity incentives nor the industry to which the target company of equity incentives belongs falls within the scope of the Restricted Industries Catalogue of Tax Incentives for Equity Incentives. The industry to which the company belongs is determined by the industry that accounted for the highest proportion of the company's main business revenue in the previous tax year.
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Q:
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What is the policy on equity incentives for listed companies?
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A:
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For stock options, restricted stock and equity awards granted to individuals by listed companies, after filing with the competent tax authorities, individuals may pay personal income tax within a period not exceeding 12 months from the date of exercise of stock options, release of restricted stock or acquisition of equity awards.
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Q:
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How to calculate personal income tax on equity incentives received by resident individuals?
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A:
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If an individual acquires stocks (rights) from an employed enterprise at a price lower than the fair market price, and the individual is not eligible for deferred tax, the difference between the actual capital contribution and the fair market price shall be excluded from the consolidated income of the year before December 31, 2021, and the full amount of the consolidated income tax rate shall be applied separately to calculate the tax.
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FAQ
