SAT's latest clarification on the CIT treatment for assignment of equity/assets and investment with non-monetary assets
Towards the end of 2014, the Ministry of Finance (MOF) and the State Administration of Taxation (SAT) jointly issued the Caishui  No.109 (Circular 109) and Caishui  No.116 (Circular 116) to substantially improve the corporate income tax (CIT) restructuring rules.
After Circular 109 and Circular 116 were released, some enterprises reported that there are uncertain issues with respect to the administration of these two circulars. As a result, the SAT recently released the Public Notice  No.33 (Public Notice 33) and Pubic Notice  No.40 (Public Notice 40) to clarify the implementation rules for Circular 116 and Article 3 of Circular 109 respectively. We recommend that enterprises should assess the impacts brought about by Public Notice 33 and Public Notice 40 on their ongoing and future M&A or restructuring transactions as well as arrange their transaction structures, contracts and accounting treatments reasonably, so that the transaction can be eligible for the Special Tax Treatment (STT) in the CIT rules.
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