Will I Avoid Tax If I Sell My Company Shares After Two Years?

Share Transfers and Shareholding Structure

Prepared by: Constantinople

Waiting two years does not make every company share tax-exempt. A limited liability company ownership interest held by an individual and a joint stock company's share certificate are not governed by the same rule. Repeated Article 80 of the Income Tax Law contains a special rule for share certificates in fully tax-liable corporations held for more than two years.

The asset sold must first be identified: certificated shares, uncertificated shares or a limited liability company ownership interest. Whether the seller is an individual or an entity, has full or limited tax liability and acts within commercial activity may also affect the result. Printing a certificate in a limited liability company does not automatically place its ownership interest in the same position as a joint stock company share certificate under this provision.

Nor can the acquisition date always be taken solely as the certificate printing date. The documentary chain for events such as formation, a capital increase, acquisition without consideration, inheritance or conversion is examined. A general conclusion that converting a limited liability company into a joint stock company and waiting a certain period always produces zero tax therefore cannot be reached. Exemption, indexation and reporting are calculated separately under the rules for the relevant year.

Prepare the share acquisition and transfer documents, certificate issuance resolution and seller's tax status. Legal classification and the tax calculation with an accountant are completed separately.

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