New Interpretation on the Tax Matters Regarding to the Asset/Equity Transfer

Thursday, 11 June 2015 09:31

The State tax bureau issued on a new interpretation (named as Announcement of the State Administration of Taxation `2015` No.40) on the “Cai Shui `2014` No. 109” on 27 May 2015 for the Asset/Equity Transfer.  Shanghai Dongjin concludes below points for your easy understanding.


  • Article 1: "The case of transfer of equities or assets at net book value between a parent enterprise and its subsidiary under 100% direct control, and between resident enterprises subject to 100% direct control of one or certain resident enterprises of the same form" as mentioned in Article 3 of the Circular, refers to the mentioned four circumstances only.

Dongjin Comments: it is applicable for all local group companies instead of only for the state-owned companies


  • Article 4: Both parties to the transaction shall, at the annual final settlement of enterprise income tax, submit the Declaration Form for Special Tax Treatment of the Asset (Equity) Transfer by Resident Enterprises (see the Appendix for details) and the relevant materials (in duplicate) to their respective competent tax authorities.

Dongjin Comments: for the qualified companies, it is no longer subject the pre-approval from the tax bureau and the applicable tax is paid at the time of EIT clearance.


  • Article 5: Both parties to the transaction shall, upon declaration of the annual enterprise income tax of the year following the completion of the equity or asset transfer, submit written description to their respective competent tax authorities to certify that the original substantial business activities with respect to equities or assets transferred have not changed within 12 consecutive months after the date of completion of the transfer of equities or assets.

Dongjin Comments: It is for the purpose of avoiding abusing of this favorable policy. It also shows that the tax bureau changes their administration from pre-approval to the post administration.


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