Taihe Research | Interpretation of Announcement No. 26 [2026] on the Policy for Regulating the Personal Income Tax on the Transfer of Restricted Shares of Listed Companies

On August 28, 2026, the Ministry of Finance, the State Taxation Administration, and the China Securities Regulatory Commission jointly issued the “Announcement on Regulating the Individual Income Tax Policy for the Transfer of Restricted Shares of Listed Companies” (Ministry of Finance, State Taxation Administration, China Securities Regulatory Commission Announcement No. 26 of 2026, hereinafter referred to as “Announcement No. 26”).

I. Policy Effective Date: Effective immediately, with no transition period.

Announcement No. 26 shall take effect as of the date of its promulgation, namely August 28, 2026. Any provisions previously in force that are inconsistent with this announcement shall be superseded by this announcement.

II. Policy Evolution: Identifying Gaps and Addressing Omissions, Advancing Through a Systematic and Standardized Process

Effective Date	File	Core content	Note
2010 January 1st	Cai Shui [2009] No. 167	Individuals’ transfers of restricted shares are taxed at a 20% rate under the “income from transfer of property” category; restricted shares include those subject to share‑reform restrictions, as well as restricted shares arising from IPOs after the 2006 delineation between old and new share‑reform regimes, and their… Bonus and share‑transfer shares accrued from the listing date to the date of share lock‑up expiration. ; Where complete and authentic documentation of the original cost cannot be provided, the original cost and reasonable taxes and fees shall be determined at 15% of the transfer income.	At present, in practice, the restricted shares under discussion primarily refer to those arising from IPOs, as well as any bonus or share‑split shares generated between the listing date and the date when the restriction is lifted. Key Highlights of Announcement No. 26
2010 November 10th	Cai Shui [2010] No. 70	The scope of restricted shares has been expanded to include cases such as individual acquisitions of previously non‑unlocked restricted shares, inheritance or division of family property, transfers via the agency transfer system to other boards, and corporate mergers or spin‑offs. The types of taxes applicable to the substantive transfer of restricted shares are now listed exhaustively. Anti‑avoidance provisions have also been clarified: where the transfer price is significantly lower than fair market value without a justifiable reason, the competent tax authority may determine the transfer income based on the closing price of the share on the trading day immediately preceding the date of the agreement, or by other reasonable methods.	It continues to adhere to the same interpretation as Document No. 167, with only statutory restricted shares—and any stock splits, capitalizations, or share reductions occurring between the date of the stock’s listing and the date when such restrictions are lifted—being classified as taxable restricted shares.
2012 March 1	Cai Shui [2011] No. 108	When a newly listed company is applying for initial share registration and is genuinely unable to provide the relevant cost‑basis documentation and certification reports, the securities depository and clearing institution, upon completing the initial share registration, will no longer accept such submissions. Instead, in accordance with applicable regulations, it will determine the cost basis of restricted shares and the allowable tax and fee expenses at 15% of the actual transfer proceeds.	Announcement No. 26 precisely addresses and tightens the “15% deemed‑to‑be‑a‑floor” provision.
2024 December 27th	Announcement No. 14 of 2024	The tax filing location has been adjusted from the place where the securities institution is located to the domicile of the listed company, thereby streamlining tax administration services such as remote filing.	Leveraging the Individual Online Tax Service Platform to enable “nationwide one-stop service” for withholding tax filing, tax payment, and self-assessment settlement.
2026 August 28th	Announcement No. 26 of 2026	Post‑unlocking, share transfers and stock dividends are brought within the tax scope; the 15% deemed‑rate provision is abolished for newly arising cases; and liquidation‑return management is strengthened.	The Beijing Stock Exchange and the New Third Board are both brought under the scope of this announcement.

III. Policy Details: Supplementing Rules, Plugging Loopholes.

Focus Area One: Closing the tax‑avoidance loophole of “post‑unlocking share transfers and stock dividends.”

Because Article 2 of Document No. 167 [2009] issued by the Ministry of Finance and the State Taxation Administration sets the temporal threshold for restricted shares to the date prior to the lifting of share‑restriction, in practice many shareholders schedule bonus‑issue and share‑transfer arrangements to occur after that date, thereby legitimizing the resulting shares as “circulating shares.” Furthermore, pursuant to Article 8 of Document No. 167—“Income derived by individuals from the transfer of listed‑company shares acquired through public offerings or secondary market transactions on the Shanghai Stock Exchange and the Shenzhen Stock Exchange shall continue to be exempt from personal income tax”—they are able to enjoy preferential tax treatment. At the same time, such high‑ratio bonus issues and share transfers dilute the post‑ex‑dividend stock price and depress the sale price of the original restricted shares; these dual effects substantially reduce the tax liability of major shareholders. Consequently, the practice of “lifting restrictions first, then implementing high‑ratio bonus issues and share transfers” has become a common tax‑avoidance strategy, widely known among market participants.

The new regulations issued in Announcement No. 26 expand the scope of restricted shares, building on the original Document Cai Shui [2009] No. 167, by adding “bonus and capital‑transfer shares that accrue after the lifting of the restriction and are registered on or after the effective date of this announcement.” Furthermore, it stipulates that when restricted shares undergo bonus issues, capitalizations, or stock splits, the securities registration and clearing company shall adjust the original cost basis of such shares in accordance with the respective ratios. This ensures that bonus and capital‑transfer shares are subject to the same tax treatment before and after the restriction is lifted, while explicitly specifying a “proportional” adjustment to the original cost basis of restricted shares, thereby preventing double taxation on the bonus and capital‑transfer portions and safeguarding tax fairness.

Point of concern No. 2: Prevent the abuse of the assessed tax collection policy.

Article 3 of Document No. 167 [2009] issued by the Ministry of Finance and the State Taxation Administration stipulates that if a taxpayer fails to provide complete and authentic documentation substantiating the original cost of restricted shares, or is unable to accurately calculate such cost, the competent tax authority shall, in all cases, determine the original cost of the restricted shares and the applicable reasonable taxes and fees at 15% of the proceeds from the transfer of those shares.

Article 4 of Document Cai Shui [2011] No. 108 stipulates that, when applying for initial share registration, if a newly listed company is genuinely unable to provide the relevant documentation on cost basis and the corresponding certification report, the securities registration and clearing institution, upon completing the initial share registration, will no longer accept any subsequent submissions of such documentation and reports. Instead, in accordance with the regulations, the cost basis of restricted shares and the applicable reasonable taxes and fees shall be determined at 15% of the actual transfer proceeds.

Key Point Comparison	Article 3 of No. 167	Article 4 of No. 108
Nature	Entity Verification Rules	Program Execution Rules
Applicable Subjects	All restricted shares	Only restricted shares of newly listed companies
Approving Entity	Competent tax authority	Securities Registration and Settlement Company
Trigger point	When transferring restricted shares and calculating income,	Initial Share Registration Stage
Procedural consequences	Real supporting documents may be supplemented in the liquidation return (under the withholding and remittance model, overpayments are refunded and underpayments are made up).	Once the initial registration is completed, no supplementary filings will be accepted; withholding will be determined directly at a rate of 15%.

It should be noted that the provision “no further supplementary filings will be accepted” represents a stricter requirement under Article 4 of Document No. 108 than under Article 3 of Document No. 167. Under the pre‑withholding and pre‑payment regime set forth in Document No. 167, taxpayers may, upon final settlement and filing, rely on authentic supporting documents to claim taxation based on actual costs. By contrast, under Document No. 108, for newly listed companies that failed to make the requisite declaration at the time of initial registration, the tax rate is fixed at a prescribed 15%; even if cost‑related documentation is subsequently submitted, it generally cannot alter the tax base.

In practice, the aforementioned valuation rules have long been abused by some listed companies through deliberate failure to disclose cost‑basis information; in an environment of rapidly accelerating capital market growth, 15% often feels less like a “penalty” and more like a “reward.”

Article 2 of Announcement No. 26 introduces new regulations that strengthen tax administration:

Scenario 1: After the announcement takes effect, if initial registration is processed but the original cost basis has not been declared, the securities institution will withhold tax at a rate of 20% on the full amount of the transfer proceeds. Note that no cost deductions are allowed; personal income tax is calculated and withheld directly at the 20% rate, effectively incentivizing compliance.

Scenario 2: For properties that were registered but not declared prior to the announcement’s entry into force, after the announcement takes effect, costs will be preliminarily withheld at 15% of the transfer income and subsequently settled upon final clearance. As for those registered but未申报 before the announcement, the policy under Document No. 108 remains applicable; however, filing a clearance return is no longer optional—it is mandatory—thus continuing to drive compliance.

As the analysis shows, the new provisions in Announcement No. 26 have revised the rigid arrangement under Article 4 of Document No. 108—“failure to make supplementary filings by the deadline plus a 15% deemed assessment”—to “full withholding at source, with subsequent supplementary filing permitted.” This change both closes the loophole whereby taxpayers deliberately fail to submit supporting documentation on the original cost basis in order to invoke the 15% deemed assessment, while also preserving for taxpayers the option to settle accounts later based on the actual costs incurred.

Focus Area Three: Liquidation Filing Management Has Become More Rational

Article 5 of Document No. 167 [2009] issued by the Ministry of Finance and the State Taxation Administration stipulates that if there is a discrepancy between the tax payable calculated by the taxpayer on the basis of the actual transfer income and actual costs, and the amount of tax withheld and remitted in advance by the securities institution, the taxpayer shall, within three months from the first day of the month following the month in which the securities institution withheld and remitted the tax, submit to the competent tax authority a final settlement return together with transaction records stamped with the seal of the securities institution and other complete and authentic supporting documents, and carry out the relevant settlement procedures. Upon review and confirmation by the competent tax authority, refund or additional tax payment procedures shall be processed based on the recalculated tax liability. If the taxpayer fails to file the final settlement with the competent tax authority within the prescribed time limit, the tax authority shall no longer process the settlement; the tax already withheld and remitted shall be fully remitted to the state treasury from the taxpayer’s security deposit account.

Under the new provisions of Announcement No. 26, if the tax liability calculated by the taxpayer based on the actual transfer proceeds and actual cost of restricted shares exceeds the amount withheld by the securities institution, or if it is less than the amount withheld and the taxpayer applies for a tax refund, the taxpayer shall, no later than June 30 of the year following the transfer of the restricted shares, submit to the competent tax authority relevant documentation, including the original cost basis of the restricted shares, and file a final settlement return, with any overpayment refunded and any underpayment made up.

The new regulations align the settlement deadline with the individual income tax final return and settlement date, making them more practical and convenient for taxpayers.

IV. Summary and Notes

Announcement No. 26 of 2026 is concise yet comprehensive, reflecting a refined approach to tax administration and a clear orientation toward anti‑avoidance measures. Centered on “subjecting post‑lockup share transfers to taxation and compelling compliant reporting of cost‑based base values,” it significantly narrows the scope for regulatory arbitrage while maintaining the 20% tax rate.

Non-retroactivity is an important transitional measure: only share transfers and capitalizations occurring after the new rules take effect are subject to this treatment; existing shares remain unaffected.

The following recommendations are for reference:

1. Companies planning to go public and their individual shareholders should ensure that cost‑basis documentation and third‑party attestations are properly maintained throughout the investment process, with all relevant materials fully preserved and archived, to avoid being subject to a “full withholding” due to incomplete records that prevent filing.

2. In accordance with the requirements of the Ministry of Finance and the State Taxation Administration’s “Notice on Personal Income Tax Issues Related to the Transfer of Restricted Shares of Listed Companies by Individuals Following the Completion of Technical and Institutional Preparations by Securities Institutions,” listed companies shall, in compliance with the business rules of the securities registration and clearing company, prepare all requisite documentation. When applying to the securities registration and clearing company for initial share registration, they must simultaneously submit detailed information on the cost basis of restricted shares provided by individual shareholders, together with an attestation report issued by an accounting firm or a tax consulting firm verifying such information. The cost‑basis documentation and attestation report submitted by newly listed companies shall include, but are not limited to: the name of the securities holder, the valid identification number, the securities account number, the full name of the new listed company, the number of restricted shares held in the new listed company, and the per‑share cost basis of those restricted shares. Each individual shareholder holding restricted shares in the newly listed company shall declare only one cost basis. If an individual holds restricted shares acquired at different costs, the cost basis per share shall be calculated using a weighted average based on the quantity of shares acquired each time; specifically: Weighted average cost of sequentially acquired restricted shares = (per‑share cost basis of the first acquisition × quantity of shares acquired in the first instance + … + per‑share cost basis of the nth acquisition × quantity of shares acquired in the nth instance) ÷ total quantity of restricted shares acquired.

Following the implementation of the new regulations, IPO intermediaries—particularly sponsoring institutions—should remind listed companies to accurately report the original cost basis at the time of initial share registration; failure to do so could result in substantial losses.

3. Following the implementation of this announcement, for newly registered equity transactions occurring after the share‑unlocking date, initiate a tax‑liability assessment procedure and concurrently monitor the cost‑basis adjustment records maintained by the securities registration and clearing institution, thereby mitigating the risks of additional tax liabilities and late filing arising from mismatches between withheld taxes and actual income.

4. Following the reduction of holdings, be sure to file a final tax return during the individual income tax settlement period to safeguard your statutory right to “refund any overpayment and pay any shortfall.”

Finally, it should be noted that retail investors in the secondary market are not affected: personal income derived from the transfer of shares of listed companies acquired through public offerings or on the transfer market at the Shanghai Stock Exchange and the Shenzhen Stock Exchange remains exempt from individual income tax. The Notice issued on the 26th applies only to cases where natural persons directly hold restricted shares of listed companies; it does not extend to indirect holdings of such shares through limited liability companies, limited partnerships, trust schemes, asset management plans, or other vehicles.

(This article reflects the author’s personal views and is intended solely for informational purposes; it does not constitute legal advice or an interpretation of the law by Taihe Law Firm. This disclaimer is hereby made.)

Attorney Liu Jun

Taihe Law Firm

Director of the Tax and Legal Affairs Committee of Taihe, a tax expert in the technology sector, Areas of Expertise: Financial and tax risk management for technology enterprises, as well as the incubation and commercialization of scientific and technological achievements; corporate M&A and restructuring—structure design and tax‑risk mitigation; financial and tax risk management throughout the corporate capitalization process; and tax‑related risk management for companies expanding overseas. In recent years, the research outcomes he has led or co‑led include: “Operational Guide to Science and Technology Tax Policies,” “An Empirical Study on the Implementation of Tax Incentives for High‑Tech Enterprises in Jiangsu Province,” “An Empirical Study on the Effectiveness of Tax Incentives for the Software and Integrated Circuit Industries in Jiangsu Province,” “An Empirical Study on the Impact of Science and Technology Tax Policies on Firms’ Innovation Capacity,” “A Study on Fiscal and Tax Policies to Stimulate ‘Mass Entrepreneurship and Innovation,’” “A Comparative Study of Different Methods for Allocating R&D Expenses within Enterprises,” “FHTP’s Responses and Recommendations to Peer Reviews of China’s Preferential Corporate Income Tax Regime for High‑Tech Enterprises,” and “An Assessment of the Actual Implementation of Corporate Income Tax Benefits by Software Enterprises in Jiangsu Province,” among others.

Liu Yufei

Business Head of the Compliance Consulting Department, Taihe (Shenzhen) Law Firm

Director of the Compliance Committee for Listed Companies and State-Owned Enterprises at Taihe, and Head of the Compliance Consulting Department at Taihe (Shenzhen) Law Firm. For many years, he has focused on researching compliance management and information disclosure in listed companies, with deep expertise in corporate standardization, corporate governance, capital operations, and compliant transactions. He has led his team in providing services to hundreds of listed companies.

This article is published by Jiangsu Taihe Law Firm. The author is Jiangsu Taihe Law Firm, and the copyright belongs to the author. Please cite the original source when reprinting; violations will be prosecuted.

Follow us