China Clarifies Value-Added Tax Issues Relating to Asset Reorganization

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Dec. 27 – China’s State Administration of Taxation (SAT) released the “Announcement on Value-Added Tax Issues Relating to the Asset Reorganization of Taxpayers (Announcement [2013] No. 66, hereinafter referred to as ‘Announcement’)” on November 19, which came into effect on December 1, 2013. Detailed information can be found below.

According to the Announcement, when a taxpayer transfers the entire or partial tangible assets and the rights and liabilities connected to those assets through a merger, division, sale or swap for multiple times during the asset reorganization process, and the final transferee is the same entity or individual, the Announcement on Value-Added Tax Issues Concerning the Asset Reorganization of Taxpayers (Announcement [2011] No.13, hereinafter referred to as ‘Announcement 37’) shall still apply. Furthermore, the multiple transfers of goods therein shall not be subject to value-added tax provided that the transferor submits the asset reorganization plan as well as other documents and materials to the competent tax authority.

Announcement 37 stipulates that the transfer of entire or partial tangible assets, together with related creditor’s rights, liabilities and manpower, are exempt from value-added tax liabilities during asset reorganization in the form of merger, division, sale and swap. Where such reorganization involves the transfer of goods, value-added tax shall not be collected either.

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