With the development of capital markets, restructuring has become one of the main ways that enterprises open financing channels, integrate resources and optimize their asset allocations. To meet corporate restructuring needs and further optimize the market environment, the Ministry of Finance, the State Administration of Taxation and other government authorities have rolled out various tax break policies (see the table). Of them, the income tax breaks in particular create a good tax policy environment for enterprises, with the effect particularly manifest in restructurings involving non-monetary payments.
Depending on the circumstances, either general tax treatment provisions or special tax treatment provisions apply to enterprise income tax in the course of corporate restructurings. Under general tax treatment, enterprise income tax is payable at the time the restructuring transaction occurs. In contrast, under special tax treatment, the parties to a qualified restructuring transaction provisionally do not recognize the income from or loss on the equity payment portion of their transaction, thereby postponing the payment of enterprise income tax.
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Cao Yiran is a partner and Wang Penghe is a trainee at Grandway Law Offices
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