An individual shall pay individual income tax on the economic benefits received in cash or in kind, in negotiable securities and other forms which are derived from the transfer of restricted shares or any other transaction which constitutes transfer of restricted shares in nature. If the restricted shares are transferred for two or more times before the restrictions are lifted, the transferor shall pay individual income tax on the income derived from each transfer as prescribed by relevant provisions. The individual income tax shall be collected under the following circumstances:

(1) An individual transfers restricted shares through the centralized trading system or block trading system of stock exchanges;

(2) An individual subscribes to or purchases shares of the Exchange Traded Fund (ETF) with restricted shares;

(3) An individual accepts an offer of purchase with restricted shares;

(4) An individual exercises cash option to transfer restricted shares to a third party who provides cash option;

(5) An individual transfers restricted shares through an agreement;

(6) The restricted shares held by an individual are legally transferred by the judicial authority to someone else;

(7) An individual inherits the title to restricted shares according to the law or assigns the title to restricted shares for the division of family properties according to the law;

(8) An individual employs restricted shares to repay the consideration which the big shareholder paid on his or her behalf to shareholders of tradable shares during the share-trading reform of a listed company; 

(9) any other circumstance which constitutes transfer in nature.

Under Document No. 167 [2009] of the Ministry of Finance, the payable individual income tax under any of the circumstances as described in subparagraphs (1) to (4) shall be levied through a combination of such ways as advance withholding and prepayment by securities institutions, declaration and settlement by the taxpayers themselves and direct withholding and payment by securities institutions. Taxpayer shall calculate the tax payable on the basis of the actual income from transfer and the actual cost. If there is any discrepancy between tax payable and the tax pre-withheld and prepaid by the securities institution, the taxpayer shall, within three months from the first day of the following month after the advance withholding and prepayment of the tax by the securities institution, apply for settlement to the competent tax authority in the place where the securities institution is located, and handle the matters concerning the declaration and settlement of tax.

Where a taxpayer is under any of the circumstances as described in subparagraphs (5) to (8), he or she shall file a tax declaration and pay the tax by him or herself. After the transfer of restricted shares, the taxpayer shall fill in and file the "Declaration of Liquidation of Personal Income Tax for Income from Transfer of Restricted Shares" with the competent tax authority to make the tax declaration by him or herself before the 15th day of the following month.