Apr 2009, Issue 10
Getting ready for the new tax implementation rules for corporate restructuring
The Detailed Implementation Rules ("DIR") to the China's Corporate Income Tax Law ("CIT Law") (Article 75 of the DIR to CIT Law) provides a general position that where an enterprise undergoes a corporate restructuring, it has to recognise the gain or loss resulting from the transfer of the relevant assets at the time of the restructuring and the tax basis of the relevant assets shall be revised according to the transaction prices, unless it is otherwise prescribed by the Ministry of Finance ("MOF") and State Administration of Taxation ("SAT"). At a first glance, this new tax rule seems to be stricter than the previous tax treatments adopted under the former tax regime before 2008. More importantly, it has been a challenge for taxpayers who have undergone corporate restructuring in 2008 to report the transactions for tax, because up to now the MOF and SAT have not issued any implementation rules on how taxable gains or losses on a corporate restructuring should be calculated or whether any concessionary treatments are available to corporate restructuring.
This Issue of our News Flash is to preview what will be the likely directions of the upcoming tax implementation rules for corporate restructuring in China.
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