Laws of the People's Republic of China

Circular of the State Administration of Taxation on the Interpretation of Related Issues concerning Deed Tax Policies for Enterprise Reorganization and Restructuring

Guo Shui Han [2006] No.844

The departments (bureaus) of finance, and the local taxation bureaus of all provinces, autonomous regions, municipalities directly under the Central Government, and cities specifically designated in the state plan,

The Circular of the Ministry of Finance and the State Administration of Taxation on Extending the Execution Period for the Several Deed Tax Policies concerning Enterprise Reorganization and Restructuring (Cai Shui [2006] No.41) provides for that the execution period of the Circular of the Ministry of Finance and the State Administration of Taxation on Several Deed Tax Policies concerning Enterprise Reorganization and Restructuring (Cai Shui [2003] No.184, hereinafter referred to as the No. 184 Document) shall be extended up to December 31, 2008. The related issues are hereby specified as follows in light of the conditions as reflected by all the regions during their implementation:

1.

The term "overall restructuring" as stipulated in Paragraph 1 of Article 1 of the No. 184 Document means such a restructuring under which the restructured enterprise succeeds to all the rights and obligations of the original enterprise.

2.

The term "enterprises" as mentioned in Articles 2, 3 and 4 of the No. 184 Document means legal person enterprises.

3.

The term "equity transfer" as stipulated in Paragraph 1 of Article 2 of the No. 184 Document means such an act whereby the entity or individual not only succeeds to the equities of the original enterprise but also changes the legal representative, investor, business scope and other items of the original enterprise. The equity transfer may, during the process of implementation, be verified according to the enterprise registration of the administrative department for industry and commerce, that is to say, where an enterprise conducts the modification registration, such paragraph shall apply; where an enterprise conducts a new establishment registration, such paragraph may not apply. Where the newly established enterprise succeeds to the land or house property of the original enterprise, the deed tax shall be collected.

4.

The term "division of enterprises" as stipulated in Article 4 of the No. 184 Document only means such an act under which the investors of the newly established enterprise, the derivative enterprise and the enterprise being divided are the same ones.

5.

The phrase "relationship between the enterprises affiliated to a same investor" as stipulated in Article 7 of the No. 184 Document means the relationship between a parent company and any of its wholly owned subsidiary companies, between any two wholly owned subsidiaries affiliated to a same parent company, between any two sole proprietorship enterprises set up by a same natural person, or between a sole proprietorship enterprise and a one-person company set up by a same natural person.

6.

The acceptance of the allotted land of the original restructuring enterprise in the form of assignment dose not fall within the scope of the No. 184 Document. And the deed tax shall be collected on the succeeding party.

The present Circular shall come into force as of the issuance date.

The State Administration of Taxation

August 28, 2006