China Issues New Corporate Restructuring Tax Rules

Article by David Olsson and Richard Feller

China has released new rules on the tax treatment of various types of corporate reorganisations, including equity and asset acquisitions, mergers, debt restructurings and enterprise spin-offs. These rules fill a gap that has existed since China's new Corporate Income Tax Law (CIT Law) became effective on 1 January 2008 and provide clarity and guidance on what tax treatment applies during a restructure and how to qualify for the available tax benefits.

The rules are contained in a notice jointly issued by the Ministry of Finance and the State Administration of Taxation on Certain Issues on Corporate Income Tax Treatment of Corporate Restructuring Transactions (Caishui [2009] No.59) (Restructure Rules). They operate retroactively from 1 January, 2008.