With the rapid development of society, the values of talents are changing, and the compensation system of enterprises is also changing. Traditional compensation, which has worked well for a long time, is no longer the most important factor in attracting talent. At present, equity incentive has become an important way for enterprises to attract and retain talents. Employee equity incentive is an incentive way for the company to share development achievements with the company, share operating risks, and realize employees' long-term service for the company's development by granting company equity to employees. In the practice of equity incentive, the incentive rules of listed companies, state-owned enterprises, non-listed companies and other types of enterprises are different. In the non-listed company equity incentive, the shareholding platform equity incentive is the mainstream model. In this paper, the core issues related to law, taxation and finance of non-listed companies' shareholding platform equity incentive are discussed for enterprise reference.

What are the shareholding ways of equity incentive of non-listed companies?

Generally, there are three types of non-listed companies to implement equity incentive holding: direct holding, indirect holding and holding on behalf of the company. Direct shareholding equity incentive means that when the company implements equity incentive, it directly grants the equity or shares of the company to the incentive object (hereinafter referred to as equity); The incentive object is directly registered as the shareholders of the company and enjoys the rights of shareholders. Indirect shareholding type equity incentive, also known as shareholding platform type equity incentive, refers to that when the company implements equity incentive, it does not directly grant the equity of the company, but sets up an incentive platform and grants the equity of the incentive platform company to the incentive object. The incentive object is not the shareholders of the company, but indirectly enjoys the rights and interests of the company through the incentive platform. Agent-holding equity incentive means that employees do not directly register as shareholders of the company, nor directly hold the equity of the incentive platform, but entrust others to hold the equity of the company or the equity of the incentive platform on behalf of others. Under the equity entrusting model, employees are not registered as shareholders of the incentive party, nor as shareholders or partners of the incentive platform, but enjoy the corresponding contractual rights and interests of the agent through the agreement with the agent. At present, in the practice of equity incentive, platform equity incentive is the mainstream shareholding method of non-listed companies.

Second, what are the advantages and disadvantages of platform equity incentives?

In general, compared with the direct shareholding type equity incentive and the agent-holding type equity incentive, the shareholding platform type equity incentive has the following advantages: (1) Employees indirectly hold the company's equity through the shareholding platform, which solves the unstable risk brought by the equity incentive to the company's equity structure, and can well separate the legal risk; (2) Through the establishment of the shareholding platform, the founder, as the actual controller of the shareholding platform, controls the voting rights of the shareholding platform, releases the equity interests while still controlling the voting rights, and the profit is not decentralized, which can strengthen the control of the company and ensure efficient decision-making in the operation process; (3) Through the construction of multiple shareholding platforms, the limit of 50 shareholders of limited liability companies is solved, and the scope of the company's equity incentive objects is expanded. Platform equity incentive also has the following disadvantages: (1) Employees are not directly registered as shareholders of the company, it is difficult to identify the identity of shareholders of the company, and the incentive effect is not as good as that of direct equity incentive; (2) When the company achieves IPO, the incentive object cannot directly sell shares in the secondary market, and the exit path of the incentive object is limited if the major shareholder does not commit to repurchase; (3) Sharing the company's equity through the shareholding platform will increase the tax burden cost of the incentive object under certain circumstances.

3. What are the specific types of shareholding platforms?

Generally, there are two types of equity incentive platform: company and partnership. A company is an enterprise legal person whose shareholders contribute capital to establish the company in accordance with the provisions of the Company Law, and shall be liable to the company within the limit of the amount of capital contribution or shares subscribed by the shareholders, and the company shall be liable for the debts of the company with all its independent legal person property. The company has an independent legal personality and is governed and operated in accordance with the Company Law and the articles of Association. A partnership enterprise refers to a for-profit organization in which partners enter into a partnership agreement according to the provisions of the Partnership Enterprise Law, make joint capital contribution, operate jointly, share benefits and share risks. A partnership does not have the status of an independent legal person and operates in accordance with the Partnership Law and the partnership agreement. As two common types of enterprises, corporation and partnership have their own advantages and disadvantages. Partnership has advantages in terms of flexibility and tax cost. In terms of the standardization of corporate governance and the feasibility of capital operation, the type of company has advantages. Is the equity incentive platform a company type or a partnership type? Incentives need to be considered from the platform positioning, capital operation planning, tax costs and other aspects, can not be generalized. In the practice of equity incentive, partnership is the type of enterprise which is accepted by the mainstream shareholding.

Fourth, how about the tax burden cost of the incentive object of the shareholding platform equity incentive?

Tax burden cost is one of the important factors that enterprises consider when determining equity incentive scheme, especially platform equity incentive. In the practice of equity incentive, the object of incentive will involve income tax problems in the links of acquisition, dividend and transfer. (1) To obtain the equity link of the shareholding platform, the incentive object shall pay individual income tax according to the difference between the awarded price and the fair price in the open market, according to the "wage and salary income" item, and the applicable tax rate is 3% to 45% of the seven-level excess progressive tax rate; (2) Dividend link, according to the current policy, whether it is a company type holding platform or a partnership type holding platform, the income tax burden of the incentive object is 20%; (3) In the transfer process, if the tax burden involved in the transfer of the subject matter is the shareholding platform equity is relatively simple, the tax rate of 20% is applied according to the "property transfer income" item. However, if the incentive party shares the income from the transfer of the company's equity from the incentive platform in the way of capital reduction or withdrawal of partners, the income tax issues involved will be much more complicated. For the company type equity incentive platform, first of all, when the equity incentive platform sells the company's equity, the enterprise income tax rate shall be 25%, 20% or 15% in accordance with the enterprise income tax law; When the incentive object reduces capital or withdraws from the incentive platform, it also needs to pay 20% individual income tax in accordance with the individual income tax law, which will involve the problem of double tax burden. As for the partnership type equity incentive platform, there is no need to pay corporate income tax when the equity incentive platform obtains the income from the transfer of the company's equity. When the incentive object is withdrawing from the incentive platform, the corresponding individual income tax should be paid according to the principle of "division first and tax later". Although this situation does not involve the problem of double tax burden, the individual income tax problem of the incentive object obtaining the corresponding rights and interests from the partnership is a more complicated problem. At this time, the incentive object is to apply an excess progressive tax rate of 5%-35% according to personal business income items. Or apply a 20% income tax rate? The jury is still out, but most tax authorities agree that a progressive tax rate of 5%-35% should be applied to excess income from operations.

5. Is the deferred tax policy applicable to the shareholding platform equity incentive?

In the practice of equity incentive, the incentive object needs to pay a certain consideration in the process of obtaining equity incentive, and if individual income tax is paid at this time, it will cause greater cash flow pressure. In order to support the implementation of the national strategy of mass entrepreneurship and innovation and promote the transformation and upgrading of China's economic structure, in 2016, the Ministry of Finance and the State Administration of Taxation issued the Notice on Improving the Income Tax Policy on Equity Incentive and technology Investment [2016] 101]. According to the notice, if the stock options, stock options, restricted shares and stock awards granted by the non-listed company to the employees of the Company meet certain conditions, the tax deferred policy may be implemented after filing with the competent tax authorities, that is, the employees may suspend tax payment when they obtain the stock rights of the stock rights incentive and defer tax payment until the transfer of the stock rights; At the time of equity transfer, the difference of equity transfer income less equity acquisition costs and reasonable taxes shall apply to the item "property transfer income", which shall be calculated and paid individual income tax at a tax rate of 20%. According to the above tax deferred policy of equity incentive, the object of equity incentive shall be "the company's equity"; However, in the shareholding platform equity incentive, employees directly hold the platform equity, whether the deferred tax policy is applicable, the tax authorities have two opinions. One view is that the subject of shareholding platform equity incentive is the equity of the shareholding platform, rather than the "equity of the company", and the tax deferral policy conditions are not applicable. Another view is that according to the principle of "substance over form", the equity of the shareholding platform is also essentially "the equity of the company", and the tax deferred policy is applicable. At present, most tax authorities adopt the first view, that is, the shareholding platform equity incentive employees do not apply the deferred tax policy, requiring employees to pay personal income tax in accordance with the "salary and salary income" when acquiring equity, and pay tax in accordance with the "property transfer income" when transferring equity.

6. Is shareholding platform equity incentive a share payment?

According to Accounting Standard for Business Enterprises No. 11 - Share Payment, "Share payment" refers to a transaction in which an enterprise grants equity instruments or assumes liabilities based on equity instruments in order to obtain services from employees and other parties. When the company implements the equity incentive, it shall include the relevant costs or expenses at the fair value of the equity instrument on the grant date, and increase the capital reserve accordingly. The relevant accounting standards of share payment are applicable to the direct shareholding equity incentive, and the incentive cost is included in the management expense. In shareholding platform equity incentive, it is generally believed that although the company directly grants the equity to the shareholding platform, in essence, it still grants the company's equity to employees for the purpose of obtaining employee services. If the price of the equity grant is lower than the fair value of the incentive object at the time of grant, it should also be treated as equity payment, and the difference between the equity grant price and the fair price of the equity on the grant date will be included in the management expense. Specifically, when applying the share payment, two situations are distinguished: (1) If the restriction can be lifted during the current period or the immediate feasible right of the equity is granted during the current period, the management expenses shall be included in the current profit and loss at one time; (2) If the restricted shares are granted in installments or the rights are granted after the waiting period, the management expenses shall be reasonably apportioned within the corresponding period. For the non-listed company to be listed, the equity incentive plan should be reasonably arranged according to its actual situation, so as to avoid the management cost of share payment affecting the company's profit index.

7. Can the expenses incurred by the shareholding platform equity incentive be deducted before tax?

The Announcement of the State Administration of Taxation on the treatment of Enterprise Income Tax related to the implementation of equity incentive plans by Resident Enterprises in China (Announcement No. 18) stipulates that listed companies establish employee equity incentive plans in accordance with the Measures for the Administration of Equity Incentive Plans for Listed Companies (Trial Implementation), and the expenses recognized in accordance with the relevant provisions of the accounting standards for Chinese enterprises may be deducted according to the pre-tax expenses of wages and salaries; Resident enterprises and non-listed companies that are listed overseas in China, where the provisions of the "Measures for the Administration of Equity Incentives for Listed Companies (Trial Implementation)" establish employee equity incentive plans, and the accounting treatment of enterprises is also dealt with in accordance with the relevant provisions of China's accounting standards, the treatment of enterprise income tax related to the equity incentive plans can be implemented in accordance with the above provisions. However, the equity incentive tool stipulated by the listed company's equity incentive management measures and other rules is "the company's stock". Can the expenses incurred by the shareholding platform equity incentive be deducted before tax? One view is that the object of shareholding platform equity incentive is the equity of the shareholding platform, rather than the "equity of the company", and the company shall not deduct the cost before tax; Another view is that according to the principle of "substance over form", the equity of the shareholding platform is also essentially "the equity of the company", and the resulting expenses can be deducted by the company before tax. At present, the tax authorities believe that the subject of the shareholding platform equity incentive is the shareholding platform equity (share), rather than the "company stock", and the resulting expenses are not deductible before tax.

Eight, the impact of shareholding platform equity incentive on IPO?

The shareholding platform equity incentive will not only affect the profit index of the company to be listed due to the share payment, but also may affect the verification of the number of shareholders of the company to be listed. According to the regulations, the equity incentive is implemented before the issuer's initial declaration, and the issuer can indirectly hold shares through shareholding platforms such as companies, partnerships, and asset management plans, and establish and improve the circulation and withdrawal mechanism of shareholding within the platform, as well as the equity management mechanism. However, the "Securities Law" stipulates that the cumulative issuance of securities to a specific object of more than 200 people is regarded as a public offering, without legal approval, no unit or individual may publicly issue securities. Therefore, the number of shareholders of the non-listed company (including the subject that needs to undergo penetration treatment) should not exceed 200, otherwise it will trigger the consequences of public issuance of shares without the approval of the securities supervision and administration department. In the shareholding platform type equity incentive, should the company to be listed calculate the number of shareholders through the shareholding platform during the verification? According to the regulations, if the employee stock ownership plan meets the requirements of the "closed-loop principle", it shall be counted as one shareholder when calculating the number of shareholders of the company; If it does not meet the requirements of the "closed-loop principle", the number of equity holders in the shareholding plan shall be calculated through the calculation of the number of shareholders of the company. The so-called "closed loop principle" mainly means that the employee stock ownership plan does not transfer shares in the company's initial public offering and promises a lock-up period of at least 36 months from the date of listing; During the lockup period before and after the listing of the issuer, if the relevant rights and interests held by the employees are to be transferred and withdrawn, they can only be transferred to employees in the employee stock ownership plan or other qualified employees.