Asset Management: Tax Comparison Between Dividends And Year-End Awards

Dividends are the main way to repay shareholders, but for natural shareholders, once dividends are paid, 20% of the personal income tax must be paid according to the existing tax law.

Although this is a "post tax tax", the state tax law does not change, and the tax must be paid.

We believe that for the serving natural shareholders, their returns are selective: dividends or

。

But under different circumstances, the tax burden on these two modes of return is different.

In view of this situation, Mr. Ge Changyin gave us a comparative analysis of the tax burden on bonus and year-end awards.

Shareholders' input and employees' labor always get rewards.

The company returns to the natural shareholders who are on the job, not only after tax dividends but also with the year-end bonus.

The so-called "dividend" is that the company distributes after tax profits to shareholders and subtracts personal income tax at the rate of 20% (without any deduction).

The "year-end bonus" issued by the company to employees is regarded as the salary and salaries. According to the progressive personal income tax rate (3%~45%) and the national tax [2005] 9, the personal income tax is calculated, and the pre tax deduction is reasonable within the reasonable limits in accordance with the regulations on the implementation of the enterprise income tax law.

For these two ways of return, there must be a problem of tax burden.

To this end, we introduce the concept of "joint tax burden", that is, the total amount of corporate income tax and the company's withholding tax on personal income tax. At the same time, the ratio of joint tax burden to personal income after tax is defined as the "joint tax negative rate".

At the same time, we discuss the combined tax burden and the joint tax burden of "dividends" and "year-end awards" under various possible circumstances.

It helps companies decide how to repay shareholders who are on the job or better.

If the company rewards the serving natural shareholders in the form of "dividends", it will have to pay the personal income tax on the basis of the 20% tax rate, and because the dividend is paid after the enterprise income tax, the 20% personal income tax is a post tax tax, resulting in duplication of corporate income tax and personal income tax.

。

In order to facilitate discussion, we first assume that "dividends" refers to the company's distribution of profits after tax profits to shareholders. What we are discussing is the distribution of cash. Dividends account refers to the "dividends" that do not deduct personal income tax. Net dividends refer to the balance of dividends after deducting personal income tax. The amount of pre tax dividends refers to the amount of corporate income tax before tax deducted according to the amount of dividends paid after the enterprise income tax.

If the company rewards the incumbent natural shareholders in the form of "year-end award", in order to facilitate discussion, it is assumed that the "year-end bonus" refers to the bonuses paid to employees at the end of the year. The bonus we discuss is cash; the year-end bonus account refers to the "year-end bonus" which does not deduct personal tax; the net bonus at the end of the year refers to the "year-end bonus" which deducts the personal income tax.

It should be noted that in fact, on the books of enterprises invested by natural persons, the amount of money deposited in the two accounts of surplus and undistributed profits contains 20% of personal income tax.

In order to avoid tax, some enterprises adopt tax sharing methods to avoid paying taxes. In fact, they are very unreasonable.

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