Announcements on Tax Payments for Asset Reorganization

Oct. 17 – China’s State Administration of Taxation released the “Announcement on Issues Relating to the Business Tax for Assets Reorganization by Taxpayers (Announcement [2011] No. 51)” and “Announcement on Issues Relating to the Value-Added Tax for Assets Reorganization by Taxpayers (Announcement [2011] No. 13)” in 2001, addressing issues concerning tax payments for asset reorganization by taxpayers.

According to the above two announcements, issues concerning tax payments for asset reorganization by taxpayers are hereby announced as follows:

Where a taxpayer transfers all or part of their physical assets and debt-claims, debts, and labor force related thereto to other entities or individuals through merger, division, sale and replacement in the course of asset reorganization, such transfers do not fall under the taxation scope of business tax. As such, business tax shall not be levied on the transfer of real property and land use rights involved therein.

Where a taxpayer transfers all or part of their physical assets and debt-claims, debts, and labor force related thereto to other entities or individuals through merger, division, sale and replacement in the course of asset reorganization, such transfers do not fall under the taxation scope of value added tax (VAT). As such, VAT shall not be levied on the transfer of goods involved therein.

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