国家税务总局关于个人非货币性资产投资 有关个人所得税征管的公告)

Following the issue of Circular 41, the SAT released Announcement  [2015] No.20 (“Announcement 20”) to specify tax collection and IIT administration issues relating to an individual’s non-monetary asset investment.

Announcement 20’s highlights are as follows:

  1. In-charge tax authorities

If an individual invests in real estate, it must declare the taxes to the in- charge tax authority where the real estate is located. If an individual invests equity interest, it must declare the taxes to the in-charge tax authority where the entity is located. If an individual  invests other non-monetary assets, it must declare the taxes to the in-charge tax authority where the invested entity is located.

  1. Calculation of taxable gain

The original cost of the transferred asset is the amount paid to acquire the asset. If the taxpayer cannot provide complete and accurate proof of the original cost and, as a result, cannot calculate the original cost correctly, the tax authority is entitled to estimate the original cost of the transferred asset.

If an individual invests using an entity’s equity interest, the original cost of the equity interest should be determined according to the Administrative Measures for Individual Income Tax on Capital Gains from Equity Transfer (Trial) (SAT Announcement [2014] No.67; for detailed information on this regulation, see our Legal Flash of December 2014).

Reasonable taxes and fees refer to those incurred during the investment with non-monetary assets.

  1. Recording the installment payment plan

The taxpayer may decide to use the installment payment plan and record it with the tax authorities within the first 15 days of the month following the month in which the transaction took place (i.e., the same timing as the tax declaration). If the taxpayer wants to adjust the plan during the installment period, it should amend it and record it with the tax authority again.

With the installment payment plan, the taxpayer must submit the relevant investment agreements and supporting materials on the current valuation and original values.

  1. Invested entity’s reporting obligation

The invested entity must report the taxpayer’s non-monetary asset investment to the in-charge  tax authority, as well any change  of shareholding affecting the taxpayer during the installment period, within 15 days from the date these events occur.

Date of issue: April 8, 2015. Effective date: April 1, 2015.