86 112
Fashion Jobs
STAND OUT FOR GOOD
Brand Rep (Sales Associate)
Permanent · ANN ARBOR
JCPENNEY
Asset Protection SC Manager
Permanent · CEDAR HILL
JCPENNEY
Beauty Field Manager-Bay Area
Permanent · DALLAS
JCPENNEY
Asset Protection Manager-San Antonio, TX
Permanent · SAN ANTONIO
RALPH LAUREN
Associate Manager
Permanent · HERSHEY
A & F
Abercrombie & Fitch - Assistant Manager, International Market Place
Permanent · HONOLULU
A & F
Hollister CO. - Brand Representative, Galleria at Tyler
Permanent · RIVERSIDE
FOOT LOCKER
Director of Safety (Supply Chain)
Permanent · CAMP HILL
LEE
PT Keyholder, Estero, FL
Permanent · ESTERO
URBN
Free People: Merchandise Planning Manager
Permanent · PHILADELPHIA
URBN
Free People: Senior Merchandise Planner
Permanent · PHILADELPHIA
KOHLS
Operations Supervisor - Weekend Overnights
Permanent · EDGEWOOD
KOHLS
Full-Time Loss Prevention Officer
Permanent · SOUTH BURLINGTON
ADIDAS
Key Account Manager: Athletic Footwear
Permanent · PITTSBURGH
KOHLS
Full-Time Loss Prevention Supervisor
Permanent · GOSHEN
KOHLS
Full-Time Loss Prevention Supervisor
Permanent · NAPLES
KOHLS
Shift Leader/Operations Manager - Weekend Night Shift
Permanent · PATASKALA
AMERICAN EAGLE OUTFITTERS
Aerie - Merchandise Leader (Part-Time) - us
Permanent · POOLER
AMERICAN EAGLE OUTFITTERS
ae - Merchandise Leader (Part-Time) - us
Permanent · MURFREESBORO
AMERICAN EAGLE OUTFITTERS
Aerie - Merchandise Leader - us
Permanent · KAPOLEI
NAVY EXCHANGE
Buyer (Level i) - Beauty Care
Permanent · VIRGINIA BEACH
NAVY EXCHANGE
Buyer (Level i) - Pet
Permanent · VIRGINIA BEACH
By
Reuters
Published
Mar 24, 2015
Reading time
3 minutes
Download
Download the article
Print
Text size

China to reap Alibaba windfall as tightens up on tax

By
Reuters
Published
Mar 24, 2015

HONG KONG, China - China could make billions of dollars from taxing gains made by employees of e-commerce giant Alibaba Group who are free to sell their shares for the first time since its IPO, as the country tightens up its leaky mechanisms for tax collection.

On Wednesday, a six-month lock-up period for the recently New York-listed stock expired, allowing insiders who bought 437 million shares prior to the IPO to sell their stock, though 100 million of them are subject to trading restrictions that apply to employees until the company reports results in May.

The total lock-up represents roughly 18 percent of Alibaba's shares, which if sold would fetch just over $37 billion at Friday's closing price.

Although Alibaba did not disclose the identity of the shareholders subject to the lock-up, many will be taxable in China, where most of its 22,000 people are employed, and its share scheme is subject to a number of controls that will help ensure China gets its tax.

Current and former employees hold around 26.7 percent of the company, having built up holdings through stock options and other incentives since 1999, according to a Reuters report from June using IPO securities filings.

Those subject to the expiring lock-up will have obtained their shares at different times and costs, so the gains figure is unknown, but the tax is expected to reach billions of dollars for China's State Administration of Taxation (SAT).

While tax on employee compensation is withheld by employers, tax on share sales must be declared by employees, meaning it's typically harder for the authorities to track.

It is not uncommon for employees participating in Chinese company stock incentive schemes to transfer their shares to offshore trusts in the Cayman or British Virgin Islands to avoid tax, according to a person who helps create such structures.

But Alibaba's newly minted millionaires won't escape the gaze of the tax inspector, said a Beijing-based accountant.

"Because it was such a large IPO, the tax bureau will for sure be monitoring that."


PREPPED AND POISED

Jacky Chu, a partner in the China tax practice at PwC, said the SAT was very familiar with this kind of stock option arrangement and would be poised to act.

"The tax officials are smart enough to know that there should be money coming in, and over the last few years the SAT has been targeting equity income," he said.

A spokesman for Alibaba said employees were responsible for reporting share sale gains to the tax authorities, but the company had registered its stock incentive plan with the State Administration of Foreign Exchange (SAFE), which controls how much money goes in and out of China.

It added that Alibaba "withholds capital gain tax from proceeds of share sales that can be repatriated back to China" through a channel stipulated by SAFE.

Although the United States does not generally tax non-resident foreigners on profits from the sale of U.S.-listed shares, China taxes Chinese residents 20 percent on capital gains, wherever made.

While the potential tax windfall is tiny relative to China's total fiscal revenue of 14 trillion yuan ($2.26 trillion) last year, it reflects the government's more rigorous stance on tax.

According to U.S. securities filings, Alibaba employees who participated in the company's stock incentive schemes and who are Chinese citizens or year-long residents were required to register with SAFE once the company went public.

"Failure to complete the SAFE registrations may subject them to fines and legal sanctions and may also limit the ability to make payment under our equity incentive plans or receive dividends or sales proceeds," the document said.

SAFE did not respond to requests for comment. The SAT would not comment on Alibaba but confirmed overseas gains by Chinese residents are subject to 20 percent tax.

A larger lock-up of more than a billion shares held by insiders including founder Jack Ma and Yahoo! Inc expires in September.

© Thomson Reuters 2024 All rights reserved.