China: Additional tax reporting requirements for ESOPs

A provision imposing additional tax reporting requirement and enforcing existing tax reporting requirements with regard to ESOPs

Additional tax reporting requirements for ESOPs

The State Taxation Administration issued guidance that is intended to simplify and streamline the tax administration process, by introducing 15 new measures regarding tax collection and administration.

The guidance (a circular) specifically includes a provision imposing an additional tax reporting requirement and enforcing existing tax reporting requirements with regard to employee share ownership plans (ESOPs).

In recent years, the tax authorities have increasingly focused on individual income tax compliance through administration and collection enforcement. To strengthen administration and improve taxpayer experience, and along with the current trend of ESOPs being widely used as tools to attract and retain talent, the recent circular imposes an additional tax reporting requirement and enforces existing tax reporting requirements for ESOPs in China. 

The circular sets out the following tax reporting requirements for companies with an ESOP:

  • Complete and file an equity incentive details disclosure form with the in-charge tax authorities within 15 days following approval of a new ESOP
  • Complete and file a disclosure form with relevant supporting documentation for ESOPs that have been implemented, with the in-charge tax authorities by 31 December 2021
  • Continue to submit details on ESOPs to the in-charge tax authorities within the prescribed timeframe in accordance with the prevailing law and regulations

The reporting requirements also apply to domestic companies’ participating in ESOPs of overseas companies.


For more information contact a KPMG tax professional:

David Ling | +1 609 874 4381 | davidxling@kpmg.com

 

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