Q: Our company has accumulated tens of millions of "undistributed profits" on its statements in recent years, is there any tax risk?
answer:
Undistributed profits are too large and do not necessarily pose a tax risk.
1. If the enterprise has paid the enterprise income tax truthfully, there is no risk of enterprise income tax.
2. If the enterprise has not yet paid dividends to natural person shareholders, there is no risk of corporate income tax.
remind
1. In order to avoid dividend tax, some enterprises take dividends in disguise through shareholder loans, reimbursement of expenses, etc., and there is a risk of concealing dividends and evading personal taxes by undistributed profits.
2. If the transfer price of the equity transfer of natural persons of some enterprises is obviously low, there is a risk that the tax department will pay the individual tax according to the sale price of the equity approved by the net assets if the undistributed profit is too large.
3. When an enterprise is deregistered and liquidated, there is a risk that the undistributed profits are too large and there is a risk of paying individual tax according to the income from liquidation.
Reference: Notice of the Ministry of Finance and the State Administration of Taxation on Several Issues Concerning the Treatment of Enterprise Income Tax in Enterprise Liquidation Business An enterprise shall, before handling tax cancellation, dispose of the undistributed profits on the accounts, and if it is formed due to long-term irrecoverable accounts receivable, it shall go through the examination and approval procedures for property losses in accordance with the relevant provisions of enterprise income tax. After the accounting is processed, the remaining undistributed profits are distributed and withheld and paid personal income tax.
4. Then there is the conversion of undistributed profits into the share capital of natural persons, involving personal income tax.
Reference: According to the Notice of the State Administration of Taxation on Further Strengthening the Administration of Individual Income Tax Collection for High-Income Earners (Guo Shui Fa [2010] No. 54), to strengthen the management of the conversion of registered capital and equity of enterprises, for those who use undistributed profits, surplus reserves and other capital reserves other than stock premiums to increase the registered capital and share capital, they should be levied personal income tax in accordance with the "interest, dividends and dividend income" item and in accordance with the current policy provisions.
Source: Tax Treasury Shandong
