Generally, enterprises reduce their registered capital for two purposes: one is to make up for losses due to poor operating performance, and hope to beautify their financial statements by reducing capital; The second is the surplus funds generated in the operation of the enterprise, and the shareholders plan to withdraw the funds for flexible use. However, in practice, foreign-invested enterprises usually take a relatively cautious attitude when reducing capital because it involves the performance assessment of local governments to attract investment.
Matters needing attention in capital reduction of foreign-invested enterprises
Although the laws and regulations of foreign-funded enterprises stipulate that foreign-funded enterprises may reduce their capital upon the approval of the examination and approval authority on the premise of changes in the total amount of investment and production and operation scale, and Article 177 of the Company Law also stipulates that "when a company needs to reduce its registered capital, it must prepare a balance sheet and an inventory of property. The company shall notify its creditors within ten days from the date of making the resolution to reduce its registered capital, and make an announcement in a newspaper within thirty days. " These provisions have given foreign-invested enterprises the right to reduce their capital, but because the reduction of capital has reduced the scope of the enterprise's ability to bear foreign debts, the law stipulates a more strict approval procedure for foreign-invested enterprises to reduce their capital to make up for losses:
1. Internal resolution process needs to be performed. According to Item (7) of Paragraph 1 of Article 38 of the Company Law and Article 44 of the Company Law, the decision to reduce the registered capital of a limited liability company and a joint stock limited company shall be made by the shareholders' meeting or the shareholders' general meeting, and both are special resolutions, that is, the resolution to reduce the registered capital made by the shareholders' meeting or the shareholders' general meeting must be passed by shareholders representing more than two-thirds of the voting rights. It can be seen that capital reduction is carried out by a majority of capital, not by a majority of shareholders.
2. The approval of the investment promotion department shall be obtained according to the requirements of the local government department. This step is not a legal process, but many foreign-invested enterprises, especially the manufacturing industry, set a higher amount of registered capital in accordance with the requirements of the local government's land investment intensity (i.e. the amount of investment per mu of land) when purchasing land and plants. If the average amount of investment per mu of land after capital reduction fails to meet the requirements, it may be rejected by the investment promotion department. This is also the reason why some local commercial departments require the consent of the investment promotion department in advance when the foreign-invested enterprises reduce their capital, which requires the enterprises to reduce their capital to communicate with the local investment promotion department.
3. Perform creditor notification and announcement process. Article 177 of the Company Law stipulates that the Company shall notify its creditors within ten days from the date of making the resolution to reduce its registered capital, and make an announcement in a newspaper within thirty days. Creditors who have received the notice may, within 30 days, or within 45 days from the date of announcement if they have not received the notice, have the right to require the company to pay off its debts or provide corresponding guarantees. In other words, the creditor has no right to stop the foreign-invested enterprise from reducing its capital, but has the right to require the company to repay its debts in advance or provide corresponding guarantees. If the creditors are not notified or announced, the industry and commerce department has the right to order them to make corrections and impose a fine of more than 10000 yuan but less than 100000 yuan on the company.
4. Submit a statement on debt repayment/debt guarantee to the industry and commerce department.
Tax analysis of capital reduction
Does capital reduction of enterprises involve tax issues?
One way to deal with the capital after the enterprise reduces its registered capital is to return it to the shareholders, and the other way is because the enterprise makes capital reserves or makes up for losses when it is unable to return the insufficient capital.
1. Capital reduction and return to shareholders
According to the Announcement of the State Administration of Taxation on Several Issues of Enterprise Income Tax (Announcement No. 34 of 2011 of the State Administration of Taxation): "If an investing enterprise withdraws or reduces its investment from an invested enterprise, the part of its acquired assets equivalent to its initial contribution shall be recognized as investment recovery; The part equivalent to the accumulated undistributed profits and accumulated surplus reserves of the invested enterprise calculated according to the proportion of reduced paid in capital shall be recognized as dividend income; The rest is recognized as income from the transfer of investment assets. "
In practice, some shareholders are original shareholders, and the part of capital reduction is the part of their original investment, which belongs to investment recovery and does not need to pay enterprise income tax. However, if the shareholders originally obtained their equity by means of equity transfer, and the purchase price was lower than the actual investment of the original shareholders, that is, the so-called discount purchase. The capital actually obtained by the enterprise's capital reduction shareholders was higher than the amount of investment in the purchase, it would generate income, and the income would be divided into dividend income (the tax rate of overseas legal persons is 10%, and the tax rate of overseas natural persons is exempted), And income from asset transfer (tax rate of overseas legal person is 10%, and tax rate of overseas natural person is 20%).
For example, in 2015, overseas company A invested $2 million in domestic company B, and transferred the equity of company B to company A at the beginning of 2016 with $1 million, Company B has a book loss of 10 million yuan, and plans to reduce its capital by 1.2 million dollars, and pay the capital reduction to overseas company A. For company A, because its investment cost is 1 million dollars, the capital reduction of 1.2 million dollars is higher than the investment cost, and the excess of 200000 dollars should be regarded as income from asset transfer, and income tax should be paid at the rate of 10%.
2. Reduce capital to make capital reserve or make up enterprise losses
After the capital reduction, the capital is not returned to shareholders, but retained in the enterprise's book, which should be the act of receiving donated capital.
According to the provisions of Article 6 of the Enterprise Income Tax Law, enterprises shall pay enterprise income tax on their income from various sources in both monetary and non monetary forms, except for tax exempt and non taxable income. As well as Article 6 of the Regulations for the Implementation of the Enterprise Income Tax Law, enterprise income includes income from donations. Therefore, according to the tax law analysis, the reduction of capital to cover losses can be regarded as the act of returning the funds to shareholders after the reduction of capital, and then the shareholders donate to the company. The income from receiving shares should be included in the taxable income of the enterprise in the current year, and the enterprise income tax should also be paid.
The donation of funds does not fall within the scope of VAT, nor does it fall within the scope of equity stamp tax, so it will not generate VAT and stamp tax.
Whether it is the return of capital reduction to shareholders or the retention of the enterprise's book, the registered capital needs to be changed, which is a matter that should be changed in tax registration. Therefore, the enterprise should go to the industrial and commercial department for change registration to reduce its registered capital, and go to the tax department for change registration.
