Core Viewpoint - The article discusses the implications of a non-listed company conducting a targeted issuance of capital reserves to a corporate shareholder, questioning whether individual shareholders are subject to personal income tax in this scenario [1][2]. Group 1: Tax Implications - The targeted issuance, despite its sophisticated terminology, essentially involves the transfer of equity from individual shareholders to a corporate shareholder, which may trigger personal income tax obligations for individual shareholders [1][5]. - Individual shareholders may agree to this arrangement to avoid the 20% personal income tax on dividend income, which corporate shareholders do not incur [2][3]. Group 2: Tax Avoidance Strategies - The primary motive behind this seemingly irrational behavior is tax avoidance, even if only temporarily, as tax regulations in China are becoming increasingly stringent against such practices [3][4]. - The article highlights two foundational principles for anti-tax avoidance measures: the substance-over-form principle and the commercial purpose standard, which allow tax authorities to scrutinize transactions for their economic substance rather than their formal appearance [4]. Group 3: Legal and Regulatory Considerations - The article emphasizes that any arrangement lacking a reasonable commercial rationale and primarily aimed at tax reduction may be disregarded by tax authorities, leading to potential penalties [4][6]. - The legitimacy of the business rationale provided by the company is questioned, suggesting that elaborate justifications may not withstand scrutiny under strict regulatory environments [6].