China: Special corporate income tax treatment rules for mergers and demergers clarified
The measures apply to corporate restructurings with a restructuring date on or after January 1, 2026.
The State Taxation Administration issued rules clarifying that special corporate income tax treatment for mergers and demergers may apply when resident corporate shareholders holding more than 50% collectively agree to the treatment.
The rules require certain key resident corporate shareholders to retain acquired equity for at least 12 months after the restructuring, or the special tax treatment may be revoked.
In parallel, a simplified amortization method is introduced for merging and demerging enterprises that acquire assets and liabilities subject to general tax treatment. Specifically, the tax basis of these assets and liabilities may be determined based on their original tax bases, and the difference between the fair value and the original tax basis can be treated as a separate asset, which is amortized evenly and deducted for tax purposes over a 10-year period beginning from the reorganization date.
The measures apply to corporate restructurings with a restructuring date on or after January 1, 2026.
For more information, contact a KPMG tax professional in China:
Milano Fang | milano.fang@kpmg.com