Ministry of Finance and State Administration of Taxation, Circular on Issues Relevant to the Levy of Individual Income Tax on Income Derived from Stock Appreciation Rights and Income Derived from Restricted Stock

财政部、国家税务总局关于股票增值权所得和限制性股票所得征收个人所得税有关问题的通知

October 10, 2009 | BY

clpstaff &clp articles &

SAT imposes individual income tax policy targeting senior management personnel.

Clp Reference: 3230/09.01.07 Promulgated: 2009-01-07

Issued: January 7 2009

Applicability: The term “stock appreciation rights” refers to the rights, granted by a listed company to its employees, to receive the earnings arising from the price increase in the company's shares of a specified quantity within a specific time period in the future and under stipulated conditions. Where a grantee exercises his/her rights under specified conditions, the listed company shall give him/her cash equivalent to the difference in the stock price on the secondary market between the exercise day and the grant day multiplied by the quantity of shares (Article 2).

The term “restricted stock” refers to the shares of a specific quantity granted by a listed company to its employees according to the conditions stipulated in the equity incentive plan (Article 3).

Main contents: Income derived from stock appreciation rights and restricted stock received by individuals from a listed company shall be subject to individual income tax in accordance with the Circular on Issues Concerning the Levy of Individual Income Tax on Income from Personal Stock Options and the Supplementary Circular on Issues Relevant to the Payment of Individual Income Tax on Income from Personal Stock Options (Article 1). Domestic listed companies that implement stock appreciation rights schemes or restricted stock schemes shall, apart from filing a record with the China Securities Regulatory Commission, submit the information on the said schemes or the implementing proposal thereof to the competent tax authorities for record (Article 4).

Related legislation: PRC Individual Income Tax Law (5th Revision), Dec 29 2007, CLP 2008 online; Implementing Regulations for the PRC Individual Income Tax Law (2nd Revision); Circular on Issues Concerning the Levy of Individual Income Tax on Income from Personal Stock Options, May 28 2005, CLP 2005 No.5 p.53; and Supplementary Circular on Issues Relevant to the Payment of Individual Income Tax on Income from Personal Stock Options, 2006

clp reference:3230/09.01.07prc reference:国税函 [2009] 461号promulgated:2009-01-07

This premium content is reserved for
China Law & Practice Subscribers.

  • A database of over 3,000 essential documents including key PRC legislation translated into English
  • A choice of newsletters to alert you to changes affecting your business including sector specific updates
  • Premium access to the mobile optimized site for timely analysis that guides you through China's ever-changing business environment
For enterprise-wide or corporate enquiries, please contact our experienced Sales Professionals at +44 (0)203 868 7546 or [email protected]