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March 23, 2015

Alibaba tax could spell billion dollar windfall for China

Alibaba employees own 437 million shares of the company.

By Vinod

A six-month lock-up period for shareholders of Alibaba has expired, allowing employees of the Chinese e-commerce giant to sell their shares.

According to reports, insiders owned 437 million shares of the company before its IPO, out of which 100 million are subject to trading restrictions in China.

China taxes its residents 20% on capital gains made from around the world, which could help the country gain billions of dollars by taxing the shareholders planning to sell their shares.

The total lock-up represents around 18%, which could be worth over $37bn, reported Reuters.

The company did not disclose the identity of the shareholders subject to the lock-up. However, an estimated 22,000 people are employed, and its share scheme is subject to a number of controls.

The publication cited Alibaba spokesman highlighting that employees were individually responsible for reporting share sale gains to the tax authorities.

However, the company did register its stock incentive plan with the State Administration of Foreign Exchange (SAFE), which is responsible to regulate the amount of money that goes in and out of China.

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According to the company’s US filing, Chinese employees who participated in the stock incentive schemes, and are citizens of China, had to register with SAFE once the company went public.

According to the document: "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."

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