China Clarifies Tax Treatment of Stock Appreciation Rig
Restricted Stock Options
Rules on Registration, Taxation Timing Aim to Strengthen Tax Collection Says Nair & Co.
November 25, 2009 09:03 AM Eastern Time
SUNNYVALE, Calif.--(EON: Enhanced Online News)--China’s State Administration of Taxation (SAT) has clarified the individu
treatment of stock appreciation rights, stock options and restricted stocks, which could result in companies revisiting their existing e
incentive plans, Vyoma Nair, co-founder of Nair & Co., said on Wednesday.
In a late August notice, the SAT stated that income derived from stock appreciation rights and restricted stocks granted by listed co
employees will be classified as employment income subject to individual income tax. The employing company is required to withhol
“A formula is provided for the calculation of the income arising from stock appreciation rights and a separate formula for income ari
stock,” Vyoma said.
The notice also states that where an individual receives stock options, stock appreciation rights or restricted stocks for the first time
year, the income from the stock plan is allowed to be calculated separately from the monthly employment income. However, if an in
these twice or more within a tax year, the income from such plans must be aggregated and taxed as such.
The tax liability for stock appreciation rights arises at the time the listed companies pay out the rights. The liability for restricted stoc
terms and conditions are fulfilled and the stock becomes unrestricted, Vyoma added. Income derived from restricted stocks must b
ownership of the underlying stocks is transferred to the recipient.
Listed companies implementing the plans above must submit the relevant documentation to the tax authorities and must act as the wi
Individual Income Tax
The tax rules provided that the extra month salary was to be added to normal employment income and taxed but without any additi
personal allowance. This tax treatment of the extra month salary