Tax on bonus share selling still controversial: experts
Starting on December 5, investors will have to pay a 5 per cent individual income tax if they want to sell bonus and dividend shares in accordance with Decree 126/2020/NĐ-CP.
|Investors at one of SSI Securities Inc's trading floors. — Photo tinnhanhchungkhoan.vn|
The decree was issued on October 19, 2020, providing new rules on tax management, including individual income tax from share trading.
The rule has caused controversy among both investors and securities firms as they have questioned how the tax agency can tell the difference between bonus or dividend shares from shares purchased on the market.
When the listed company pays a dividend in bonus shares, all financial indicators remain except for the price of the shares. When the volume of outstanding shares increases, the price of the shares is adjusted down to ensure the firm’s market value doesn’t change after the share issuance.
The day when the share price is curbed is called the ex-dividend day.
Normally, the tax rate for a transaction is 0.1 per cent of the trading value. If the investor receives a cash dividend, the tax rate is 5 per cent of the dividend value.
“If bonus and dividend shares are taxed, that is unreasonable,” investor Nguyen Thien Ha was quoted by tinnhanhchungkhoan.vn as saying.
“When the stock falls, the investor suffers loss but he still has to pay the tax," Ha added.
It is even more difficult for brokerage firms to differentiate between bonus and dividend shares from those the investor already owns.
Bonus shares are often imported into the investor’s account without being classified from already-purchased shares.
So if the differentiation is wrong, it would lead to tax loss and damage the interest of the investor.
Securities firms can put the bonus and dividend shares into a different section of the investor’s account to keep it separate from already-purchased shares, Dieu Ngoc Tuan, director of legality and compliance control at VNDirect Securities Corp, said.
By doing that, the company may be able to help the investor settle tax duties when it comes to tax payment time, he added.
“But that will mean more work and consumed resources for both company and its client in managing assets,” he said.
Nguyen Ngoc Lan, deputy director of Agribank Securities Co, said putting securities firms in charge of settling tax duties for investors was really troublesome because they would have to take care of something that is not theirs.
It is always hard to tell bonus and dividend shares from shares bought on the market, she added.
According to SSI Securities, it should take securities firms 6-12 months to prepare and meet requirements to settle additional tax duties for investors as they are obliged to under Decree 126.
The main problem is differentiating between bonus shares from already-purchased shares, so it is difficult for SSI to deploy the new system and personnel.
“The company needs more time to update its technological system. Any tax duties cannot be settled manually,” the company said.
“Tax duties have a direct impact on the interest of investors, any system failures will lead to losses for securities firms and disputes with their clients.” VNS
Multiple banks have recently worked out plans to issue shares, pay bonuses and dividends in shares and sell shares under the employee stock ownership plan (ESOP).