Equity Incentive Personal Income Tax Policy

Personal income tax policy for equity incentives:

1. When tax liability arises, no tax is required during the grant stage. Employees at the granting node have not yet obtained any income through equity incentives. Employees lack the necessary income to pay taxes at this time. Funds, and in order to fully realize the effect of the incentive, it is reasonable and necessary that no tax is required during the grant stage.

2. Calculation of tax payable;

3. Preferential tax policies and separate taxation. According to the latest decision of the State Council executive meeting, by the end of 2022, the equity incentive income of listed companies will be taxed separately. , not combined with salary and year-end bonus;

4. Tax collection and management.

Analysis

During the period from grant to the lifting of restrictions on sales, relevant laws stipulate that income from the transfer of stock options before exercise should be taxed as income from property transfer, but domestic A-share listed companies The equity incentive rules of the company are that the granted equity shares cannot be transferred before the sales restrictions are lifted, the rights are exercised, and the rights are vested. In case of special circumstances such as resignation. Deferred tax payment. According to relevant regulations, stock options, restricted stocks and equity incentives granted to individuals by listed companies, after being filed with the competent tax authorities, can be deferred from the date of exercise of stock options, release of restricted stocks or acquisition of equity incentives. Pay personal income tax within 12 months.

What is equity incentive?

“Equity incentives, also known as option incentives, are a long-term incentive mechanism implemented by enterprises in order to motivate and retain core talents. It is currently one of the most commonly used methods of motivating employees. Equity incentives are A method for enterprises to use part of their equity to motivate senior managers or outstanding employees.

Legal basis

"Individual Income Tax Law of the People's Republic of China"

Legal basis. p>

Article 2 The following personal income shall be subject to personal income tax:

(1) Income from wages and salaries;

(2) Income from remuneration for labor services;

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(3) Income from royalties;

(4) Income from royalties;

(5) Business income;

(6) Income from interest, dividends, and bonuses;

(7) Income from property rental;

(8) Income from property transfer;

(9) Incidental income.

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The income earned by resident individuals from Items 1 to 4 of the preceding paragraph (hereinafter referred to as comprehensive income) shall be calculated on a consolidated basis in the tax year; the income earned by non-resident individuals from Items 1 to 4 of the preceding paragraph shall be calculated on a monthly basis. Or individual income tax shall be calculated on a per-item basis. If the taxpayer obtains income from items 5 to 9 of the preceding paragraph, personal income tax shall be calculated separately in accordance with the provisions of this Law.