| Client | A Shenzhen AI research company with a partnership shareholder |
|---|---|
| Industry | Artificial intelligence R&D |
| Headquarters | China |
| Entity type and location | Domestic company, Shenzhen |
| Services used | Equity transfer tax filing |
| Project period | 17 August 2026 – 23 October 2026 |
When one of its shareholders, a partnership, transferred its equity, a Shenzhen AI research company needed to know how the transfer should be filed for tax. Hongda Service confirmed the filing requirements, calculated the taxes involved and guided the client through the filing, which was completed.
The company and the transaction
The client was a domestic company in Shenzhen developing artificial intelligence models. One of its shareholders, a partnership, transferred its equity in the company, and the client's question was how to handle the tax filing for that transfer.
Who pays income tax?
A Chinese partnership is not itself taxed on income: income tax is assessed on each partner. Income is allocated to the partners before tax, and this covers profits retained by the partnership as well as distributed income. The table compares the general treatment for three types of transferring shareholder.
| Transferring shareholder | Who pays income tax? | General calculation |
|---|---|---|
| Chinese resident company | The company | The gain is included in taxable income; the standard corporate income tax rate is 25%, subject to applicable relief. |
| Individual holding shares directly | The individual | Generally, tax is 20% of the gain calculated as transfer income minus the equity's original cost and reasonable expenses, subject to applicable relief or treaty treatment. |
| Chinese partnership | Each partner | Individual partners generally pay tax on business income at progressive rates of 5%–35%; corporate partners pay corporate income tax. |
Under the general business-income rules, the partnership's annual income is calculated after deducting costs, expenses and losses from revenue, and each individual partner's share is then determined under the applicable allocation rules. An exception applies to qualifying partnership venture capital funds that are registered, compliant and have elected and registered single-investment-fund accounting: their individual partners pay 20% on allocated equity transfer gains and dividends. This policy runs until 31 December 2027.
Stamp duty does not follow the income tax look-through: it is charged on the parties to the transfer instrument, so the partnership pays it in its own right, at the statutory rate of 0.05% for non-securities equity transfer instruments.
Hongda Service's work and the outcome
Hongda Service first confirmed the tax filing requirements for the equity transfer. It then calculated the tax types and amounts involved and guided the client through the filing.
The project ran from 17 August to 23 October 2026 and ended with the equity transfer tax filing completed.
To discuss the tax filing for a shareholder's equity transfer, contact Hongda Service.