The State Administration of Taxation (SAT) made, in a circular recently, the fundamental provisions for the tax-related issues of the individuals' equity transfer.
Under the circular, if both parties of the equity transfer have signed the equity transfer agreements but fail to complete the transaction, the enterprises must fill in the Report of Change of Individual Shareholders when applying for registration of the equity transfer to the industrial and commercial administration authorities, and must report to the competent tax authorities.
Besides, when the individual equity transfer is successful, the transferors who shall pay the income tax or the transferees who shall withhold the tax must declare the individual income tax to the competent tax authorities and acquire the tax completion certificate. They can only proceed the shareholder change procedures with the industrial and commercial administration authorities after obtaining such certificate.
(Source: State Administration of Taxation) (July.1th 2009)