If a father gives shares or stocks to his children, will he be subject to personal income tax? Regulations on tax bases?

Do shareholders have the right to donate shares?

Pursuant to Clause 5, Article 127 of the Law on Enterprises 2020, the provisions on Share Transfer are as follows:

“…

5. Shareholders have the right to donate part or all of their shares in the company to other individuals or organizations; Use shares to repay debt. Individuals and organizations that are gifted or receive debt repayment in the form of shares will become shareholders of the company.

Thus, based on Clause 5, Article 127 of the Law on Enterprises 2020, shareholders have the right to donate part or all of their shares in the company to other individuals or organizations.

Are donated shares and stocks subject to personal income tax?

Pursuant to Clause 10, Article 2 of Circular 111/2013/TT-BTC, regulations on taxable income are as follows:

“Article 2. Taxable income

According to the provisions of Article 3 of the Law on Personal Income Tax and Article 3 of Decree No. 65/2013/ND-CP, income subject to personal income tax includes:

…

10. Income from receiving gifts

Income from receiving gifts is the income an individual receives from domestic and foreign organizations and individuals, specifically as follows:

a) Receiving gifts of securities includes: share, the right to buy stocks, bonds, treasury bills, fund certificates and other securities according to the provisions of the Securities Law; shares of individuals in joint stock companies according to the provisions of the Enterprise Law.

b) For gifts that are capital in economic organizations and business establishments, including: capital in limited liability companies, cooperatives, partnerships, business cooperation contracts, capital in private enterprises, individual business establishments, capital in associations and funds allowed to be established according to the provisions of law or the entire business establishment if it is a private enterprise or individual’s business establishment.

c) Receiving gifts of real estate includes: land use rights; land use rights with assets attached to the land; home ownership, including housing formed in the future; infrastructure and construction works attached to land, including construction works formed in the future; land lease rights; water surface lease rights; Other income received from inheritance is real estate in any form; Deduct income from gifts of real estate guided in Point d, Clause 1, Article 3 of this Circular.

d) For gifts of other assets, ownership or use rights must be registered with State management agencies such as: cars; motorbikes, motorbikes; Ships, including barges, canoes, tugboats, and pushboats; boats, including yachts; aircraft; hunting guns, sporting guns.”

Thus, donating shares is included in income from donating securities and is therefore still subject to personal income tax. The child must pay personal income tax.

Regarding tax bases for resident individuals

Pursuant to Article 16 of Circular No. 111/2013/TT-BTC (amended by Clause 1, Article 19 of Circular 92/2015/TT-BTC) stipulates as follows:

Tax calculation bases for income from excess Next, gifts are taxable income and tax rates.

– Taxable income

Taxable income from receiving inheritance or gifts is the value of the property received as inheritance or gift exceeding 10 million VND each time it is received. The value of property received as inheritance or gift is determined for each case, specifically as follows:

+ For inheritance and gifts of securities: the value of the inherited assets is the value of the securities at the time of registration of transfer of ownership. Taxable income from inheritance or gift of securities is the value of the property received as inheritance or gift exceeding 10 million VND on all securities received without deducting any expenses.

Specifically as follows:

++ For securities traded on the Stock Exchange: the value of the securities is based on the reference price on the Stock Exchange at the time of registration of securities ownership.

++ For securities other than the above cases: the value of the securities is based on the accounting book value of the company issuing that type of securities at the time of preparing the most recent financial statement according to the provisions of law on accounting before the time of registering securities ownership.

+ For inheritances and gifts that are capital contributions in economic organizations and business establishments: income for tax calculation is the value of the capital contribution determined based on the company’s accounting book value at the latest time before the time of registering ownership of the capital contribution.

+ For inheritance and gifts that are real estate: the value of real estate is determined as follows:

++ For real estate that is the value of land use rights, the value of land use rights is determined based on the Land Price List prescribed by the Provincial People’s Committee at the time the individual carries out procedures to register real estate use rights.

++ For real estate that is houses and architectural works on land, the real estate value is determined based on the regulations of the competent State management agency on house value classification; regulations on basic construction standards and norms promulgated by competent State management agencies; The remaining value of the house or architectural work at the time of carrying out ownership registration procedures.

In case it cannot be determined according to the above regulations, it is based on the registration fee calculation price prescribed by the Provincial People’s Committee.

++ For inheritances and gifts that are other assets that must be registered for ownership or use rights with the State management agency: the asset value is determined on the basis of the price list for calculating registration fees prescribed by the Provincial People’s Committee at the time the individual carries out procedures to register ownership rights and rights to use the inherited assets or gifts.

In case an individual receiving an inheritance or gift is imported property and the individual receiving the inheritance or gift must pay taxes related to the import of property, the value of the property used as a basis for calculating personal income tax for inheritance and gifts is the registration fee calculation price set by the Provincial People’s Committee at the time of carrying out procedures for registering ownership and use rights of the property minus (-) the taxes at the import stage that the individual pays according to regulations.

– Tax rate: Personal income tax rate for inheritance and gifts is applied according to the Full Tax Schedule with a tax rate of 10%.

– Time to determine taxable income

The time to determine taxable income from inheritance or gifts is the time the individual carries out procedures to register ownership and use rights of inherited assets or gifts.

– How to calculate tax payable

Above is our advice related to donating shares and stocks that you are interested in.