Significant improvement on the corporate income tax treatments for restructuring transactions
In March 2014, the State Council issued a circular, Guofa  No.14 (Circular 14) , urging various government bodies to improve their policies so as to encourage mergers and acquisitions (M&A) in China. In response to Circular 14, the Ministry of Finance (MoF) and the State Administration of Taxation (SAT) recently released two new circulars Caishui  No.109 (Circular 109) and Caishui  No.116 (Circular 116) to substantially improve the corporate income tax (CIT) restructuring rules.
These relaxed CIT restructuring rules will definitely benefit companies conducting M&A transactions or undergoing intra-group restructuring in China. We recommend that management study the changes and assess the relevant impact on their ongoing and future restructuring transactions. Where relevant, it is worth considering restructuring the transaction patterns in order to leverage on this significant policy improvement.
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