The first one: change the shareholding model.
According to the Individual Income Tax Law of People's Republic of China (PRC), 20% of the individual income tax shall be paid on the interest, dividends and bonus income obtained by individuals with creditor's rights. This way of holding shares is the practice of many shareholders now. However, there is not much room for tax planning in this way of holding shares.
The second way: indirect shareholding.
(1) Indirect shareholding of natural persons through partnership enterprises: According to the Notice on Implementing the Standards (Guo [2001] No.84) (hereinafter referred to as "Document No.84"), "the interest, dividends and bonuses returned by the partnership enterprises' foreign investment shall not be incorporated into the profits of the partnership enterprises and shall be obtained as individual investors. According to the fifth paragraph of Article 3 of the Individual Income Tax Law (20 1 1), the income tax rate of interest, dividends and bonuses is 20%. Therefore, when a natural person holds shares through a partnership, the personal income tax rate of dividends obtained from listed companies is 20%, which cannot solve the problem. But from the perspective of enterprise income tax, of course, the advantage is greater than the direct shareholding of natural persons.
(2) Indirect shareholding of natural persons through limited companies: When a listed company pays dividends, according to Article 26 of the Enterprise Income Tax Law (2007), dividends, bonuses and other equity investment income among eligible resident enterprises are tax-free income. This method adds a lot of space for tax planning.
In order to ensure the success of reasonable tax avoidance, in addition to understanding the above methods, more work should be done, including all aspects of work. It should be noted that if you are not sure about reasonable tax avoidance, you can seek the help of a professional team or a tax financing platform to reduce tax risks.
In fact, it is more reliable and safer to reduce the high dividend tax quickly, conveniently, at low cost, reasonably and in compliance, and directly find a platform specialized in tax collection like payroll.