Three Ministries Regulate Individual Income Tax on Restricted Shares: Bonus and Stock Splits Now Included in Taxable Scope
Nashnova编辑部
China's Ministry of Finance, tax authority, and securities regulator jointly confirmed a 20% personal income tax on restricted-share transfers and, for the first time, classified post-unlock bonus and conversion shares as restricted stock — substantially widening the tax base for individual holders.
What exactly changed?
The joint notice classifies restricted-share transfer gains as "property transfer income", subject to a flat 20% personal income tax rate.
The key addition: bonus shares and conversion shares spawned from restricted stock after its lock-up expires — provided share registration occurs after the notice takes effect — are now treated as restricted stock themselves.
This means → the previously grey route of "unlock, receive bonus shares, then sell the bonus shares outside the restricted-stock tax net" is formally closed.
Why were bonus and conversion shares targeted?
Bonus and conversion shares (shares a listed company distributes to existing holders out of retained earnings or capital reserves, at no cost to the holder) generate no cash flow but multiply a single restricted holding into several lots.
Under the old rules only the original restricted lot was taxed; newly spawned shares sat in a grey zone, and some holders argued they fell outside the restricted-stock definition.
In plain terms = the policy's core is one sentence: shares "born" from restricted stock are taxed exactly like their parent shares.
How is cost basis determined — and by whom?
When a listed company applies for initial share registration, it must submit to the securities depository the original cost basis data provided by individual restricted-share holders, together with a verification report from an accounting or tax advisory firm.
When bonus, conversion, or reverse-split events occur, the securities depository must adjust the cost basis proportionally.
This means → cost recognition shifts from "self-reported after the fact" to "locked in up front" — the listed company and its advisors now bear the gatekeeping duty, narrowing individual room for manoeuvre.
What happens after the shares are sold?
If the tax owed — based on actual proceeds and actual cost — differs from the amount already withheld by the broker, the taxpayer must file a settlement return with the local tax authority by June 30 of the following year; any shortfall is paid, any excess is refunded.
In plain terms = the broker withholds a provisional amount at the point of sale; once the transaction is complete, you reconcile the real numbers with the tax office and settle the difference.
How wide is the coverage?
The rules extend beyond the Shanghai and Shenzhen main boards: transfers of original shares in companies listed on the National Equities Exchange and Quotations system (the "New Third Board") and on the Beijing Stock Exchange are covered on the same terms.
This reflects a regulatory intent to cast a single net over restricted-share income tax across every public market, leaving no inter-board arbitrage gap.
The critical implementation test ahead: whether post-unlock bonus and conversion shares can be accurately identified in the securities registration system and fed into cost-basis adjustments will determine how effectively the policy lands.
市场有风险，内容仅供研究参考，不构成投资建议。