Is it necessary to pay taxes on equity investment?

Legal analysis: whether equity investment needs to be taxed should take into account that there are many kinds of investment income, and not all investment income is tax-free. Article 26 (2) (3) of the Enterprise Income Tax Law stipulates that income from equity investment such as dividends and bonuses among eligible resident enterprises shall be exempted from tax. Non-resident enterprises set up institutions within the territory of China to obtain dividends, bonuses and other equity investment income actually related to the institutions. Article 83 of the Regulations for the Implementation of the Enterprise Income Tax Law of People's Republic of China (PRC) refers to the investment income obtained by resident enterprises directly investing in other resident enterprises. It does not include the investment income obtained by continuously holding the public offering and listing shares of resident enterprises for less than 12 months.

Legal basis: People's Republic of China (PRC) Tax Collection and Management Law.

Article 1 This Law is formulated with a view to strengthening the administration of tax collection, standardizing tax collection, safeguarding national tax revenue, protecting the legitimate rights and interests of taxpayers and promoting economic and social development.

Article 2 This Law is applicable to the collection and management of various taxes collected by tax authorities according to law.

Article 3 The collection, suspension, reduction, exemption, refund and supplementary payment of taxes shall be carried out in accordance with the law. Where the State Council is authorized by law, it shall be implemented in accordance with the administrative regulations formulated by the State Council.

No organ, unit or individual may, in violation of the provisions of laws and administrative regulations, arbitrarily make decisions on tax collection, suspension, tax reduction, exemption, tax refund, overdue tax and other decisions inconsistent with tax laws and administrative regulations.

Article 4 Units and individuals that are obligated to pay taxes according to laws and administrative regulations are taxpayers.

Units and individuals that have the obligation to withhold and pay taxes according to laws and administrative regulations are withholding agents. Taxpayers and withholding agents must pay taxes, withhold and remit taxes and collect and remit taxes in accordance with the provisions of laws and administrative regulations.