Circular on Issues Concerning Treatment of Enterprise Income Tax in Enterprise Restructuring Business
Circular on Issues Concerning Treatment of Enterprise Income Tax in Enterprise Restructuring Business
[Lexis China Comments]
According to the Circular on Issues concerning the Enterprise Income Tax Treatment for the Promotion of Enterprise Restructuring, Item 2 of Article 6 of the Circular of the Ministry of Finance and the State Administration of Taxation on Issues Concerning Treatment of Enterprise Income Tax in Enterprise Restructuring Business (Cai Shui [2009] No. 59), which originally provided that “In the event of equity acquisition, where the equities purchased by the acquiring enterprise are not less than 75% of the total equities of the acquired enterprise,” has been revised to “In the event of equity acquisition, where the equities purchased by the acquiring enterprise are not less than 55% of the total equities of the acquired enterprise.” Item 3 of Article 6 of the document Cai Shui [2009] No. 59, which originally provided that “In the event of asset acquisition, where the assets acquired by the receiving enterprise are not less than 75% of the total transferring enterprise's assets,” has been revised to “In the event of asset acquisition, where the assets acquired by the receiving enterprise are not less than 50% of the total transferring enterprise's assets.” Please take note of this when using the document.
Circular on Issues Concerning Treatment of Enterprise Income Tax in Enterprise Restructuring Business
Cai Shui [2009] No. 59
April 30, 2009
All offices of State Taxation Administration and local taxation bureaus of all provinces, autonomous regions, municipalities directly under the Central Government, and cities specifically designated in the State plan, and the Finance Bureau of Xinjiang Production and Construction Corps,
In accordance with Article 20 of the Law of the People's Republic of China on Enterprise Income Tax and Article 75 of the Regulations on the Implementation of the Enterprise Income Tax Law of the People's Republic of China (Order of the State Council No. 512), issues on the specific treatment of enterprise income tax in connection with enterprise restructuring are notified as follows:
I. For the purpose of this Circular, enterprise restructuring refers to transactions of material change in legal structure or economic structure of an enterprise other than changes in the daily operating activities, including change in legal form of the enterprise, debt restructuring, equity acquisition, asset acquisition, merger, and split.
1. Change in legal form of an enterprise refers to simple changes in the registered name of the enterprise, address and form of organization of an enterprise organization, excluding other types of restructuring stipulated in this Circular.
2. Debt restructuring refers to an event in which a creditor grants a concession in accordance with the written agreement entered into between the creditor and the debtor or a written order of a court when the debtor gets into a financial problem.
3. Equity acquisition refers to a transaction that an enterprise (hereinafter referred as the "acquiring enterprise") acquires the equities of another enterprise (hereinafter referred to as the "acquired enterprise") to take control over the acquired enterprise. The forms of the consideration payment by the acquiring enterprise include equity consideration, non-equity consideration or a combination of both.
4. Asset acquisition refers to a transaction that an enterprise (hereinafter referred to as the "receiving enterprise") purchases the substantive operating assets of another enterprise (hereinafter referred to as the "transferring enterprise"). The forms of the consideration payment by the receiving enterprise include equity consideration, non-equity consideration or a combination of both.
5. Merger refers to the lawful merger of two or more enterprises whereby one or more enterprise (hereinafter referred to as the "merged enterprise") transfers all the assets and liabilities to another existing or newly-established enterprise (hereinafter referred to as the "merging enterprise") with the shareholders of the merged enterprise receiving equity or non-equity consideration of the merging enterprise.
6.
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According to the Circular on Issues concerning the Enterprise Income Tax Treatment for the Promotion of Enterprise Restructuring, Item 2 of Article 6 of the Circular of the Ministry of Finance and the State Administration of Taxation on Issues Concerning Treatment of Enterprise Income Tax in Enterprise Restructuring Business (Cai Shui [2009] No. 59), which originally provided that “In the event of equity acquisition, where the equities purchased by the acquiring enterprise are not less than 75% of the total equities of the acquired enterprise,” has been revised to “In the event of equity acquisition, where the equities purchased by the acquiring enterprise are not less than 55% of the total equities of the acquired enterprise.” Item 3 of Article 6 of the document Cai Shui [2009] No. 59, which originally provided that “In the event of asset acquisition, where the assets acquired by the receiving enterprise are not less than 75% of the total transferring enterprise's assets,” has been revised to “In the event of asset acquisition, where the assets acquired by the receiving enterprise are not less than 50% of the total transferring enterprise's assets.” Please take note of this when using the document.
Circular on Issues Concerning Treatment of Enterprise Income Tax in Enterprise Restructuring Business
Cai Shui [2009] No. 59
April 30, 2009
All offices of State Taxation Administration and local taxation bureaus of all provinces, autonomous regions, municipalities directly under the Central Government, and cities specifically designated in the State plan, and the Finance Bureau of Xinjiang Production and Construction Corps,
In accordance with Article 20 of the Law of the People's Republic of China on Enterprise Income Tax and Article 75 of the Regulations on the Implementation of the Enterprise Income Tax Law of the People's Republic of China (Order of the State Council No. 512), issues on the specific treatment of enterprise income tax in connection with enterprise restructuring are notified as follows:
I. For the purpose of this Circular, enterprise restructuring refers to transactions of material change in legal structure or economic structure of an enterprise other than changes in the daily operating activities, including change in legal form of the enterprise, debt restructuring, equity acquisition, asset acquisition, merger, and split.
1. Change in legal form of an enterprise refers to simple changes in the registered name of the enterprise, address and form of organization of an enterprise organization, excluding other types of restructuring stipulated in this Circular.
2. Debt restructuring refers to an event in which a creditor grants a concession in accordance with the written agreement entered into between the creditor and the debtor or a written order of a court when the debtor gets into a financial problem.
3. Equity acquisition refers to a transaction that an enterprise (hereinafter referred as the "acquiring enterprise") acquires the equities of another enterprise (hereinafter referred to as the "acquired enterprise") to take control over the acquired enterprise. The forms of the consideration payment by the acquiring enterprise include equity consideration, non-equity consideration or a combination of both.
4. Asset acquisition refers to a transaction that an enterprise (hereinafter referred to as the "receiving enterprise") purchases the substantive operating assets of another enterprise (hereinafter referred to as the "transferring enterprise"). The forms of the consideration payment by the receiving enterprise include equity consideration, non-equity consideration or a combination of both.
5. Merger refers to the lawful merger of two or more enterprises whereby one or more enterprise (hereinafter referred to as the "merged enterprise") transfers all the assets and liabilities to another existing or newly-established enterprise (hereinafter referred to as the "merging enterprise") with the shareholders of the merged enterprise receiving equity or non-equity consideration of the merging enterprise.
6.
......