Announcement of the State Taxation Administration on Matters Concerning the Administration of Income Tax Treatment of Enterprise Reorganization Transactions

Recently, the State Taxation Administration issued the "Announcement on Tax Collection and Administration Issues Concerning Income Tax Treatment of Enterprise Restructuring" (No. 13 of 2026, hereinafter referred to as the "Announcement"). To facilitate understanding and implementation by taxpayers and tax authorities, the "Announcement" is interpreted as follows:

I. What is the background for formulating and issuing the Announcement?

To encourage corporate mergers and reorganizations, the state has introduced special tax treatment policies for corporate income tax on corporate restructuring, allowing qualifying enterprises to temporarily not recognize the transfer income of relevant assets in the current period of restructuring, but instead defer recognition to subsequent years, effectively reducing the tax burden of enterprises in the current period of restructuring.

In recent years, corporate mergers, splits, and restructuring businesses have gradually increased. According to current policy provisions, all parties involved in the same restructuring business should adopt a consistent tax treatment principle, that is, uniformly apply general or special tax treatment. However, in tax collection and administration practice, some companies, especially listed companies, have numerous shareholders including natural persons, partnership enterprises, contractual asset management products, non-resident enterprises, and other types. Even if they meet other conditions for special tax treatment, it is difficult to satisfy the condition that all shareholders reach consensus, making it difficult to apply special tax treatment. To encourage enterprises to integrate resources and grow stronger, based on extensively listening to opinions and suggestions from taxpayer representatives, relevant departments, and grassroots tax authorities, the State Taxation Administration issued the Announcement, which, while adhering to the basic principles of special tax treatment, appropriately optimized requirements such as consistency of tax treatment, further improving policy operability.

II. For a qualifying enterprise merger business to apply the special tax treatment, do all shareholders need to reach agreement with the merged enterprise and the merging enterprise?

No. Previously, according to documents such as the Announcement of the State Taxation Administration on Issuing the Measures for the Administration of Enterprise Income Tax on Enterprise Restructuring Business (No. 4 of 2010), all parties to the same restructuring business should adopt a consistent tax treatment principle, that is, uniformly apply general or special tax treatment. The Announcement optimizes this. According to the Announcement, at the shareholder level of the merged (split) enterprise, if resident enterprise shareholders with a shareholding ratio of no less than 5% and the top ten resident enterprise shareholders reach consensus, and the total shareholding ratio of the resident enterprise shareholders reaching consensus exceeds 50%, the equity held by the shareholders reaching consensus and the assets and liabilities transferred by the merged (split) enterprise corresponding to the equity, as well as the assets and liabilities acquired by the merging (splitting) enterprise, may apply special tax treatment.

Case 1: Assume Company A absorbs and merges Company B. Company B has four shareholders in total, and the shareholder types and shareholdings are respectively: Shareholder A is a resident enterprise, holding 45%; Shareholder B is a natural person, holding 40%; Shareholder C is a resident enterprise, holding 10%; Shareholder D is a resident enterprise, holding 5%. According to the requirements of the Announcement, if Shareholder A, Shareholder C, and Shareholder D reach agreement with the merged enterprise and the merging enterprise on special tax treatment, then the total shareholding ratio of resident enterprise shareholders that have reached agreement is 60%, meeting the requirement that the total shareholding ratio exceeds 50%. If other policy provisions are met, special tax treatment may apply.

III. If resident enterprise shareholders with a combined shareholding ratio exceeding 50% reach an agreement with the merged enterprise and the merging enterprise, and other conditions for special tax treatment are met, how shall the parties handle tax treatment?

The Announcement provides that, for enterprise merger and division transactions, where resident enterprise shareholders of the merged (divided) enterprise whose aggregate shareholding ratio exceeds 50%, together with the merged (divided) enterprise and the merging (dividing) enterprise, reach agreement on applying special tax treatment, the equity held by the shareholders who reached agreement and the assets and liabilities of the merged (divided) enterprise corresponding to such equity that are transferred, as well as the assets and liabilities acquired by the merging (dividing) enterprise, may apply special tax treatment. The equity held by the remaining shareholders and the assets and liabilities of the merged (divided) enterprise corresponding to such equity that are transferred, as well as the assets and liabilities acquired by the merging (dividing) enterprise, shall all apply general tax treatment.

Case 2: Continuing from Case 1, Enterprise A absorbs and merges Enterprise B, with 100% equity payment. Shareholder A of Enterprise B is a resident enterprise holding 45%; Shareholder B is an individual holding 40%; Shareholder C is a resident enterprise holding 10%; Shareholder D is a resident enterprise holding 5%. Enterprise A, Enterprise B, and Shareholders A, C, and D reach a consensus on tax treatment. Assuming other special tax treatment conditions are met, the tax basis of Enterprise B's assets and liabilities is RMB 10 million, and the fair value is RMB 18 million. The specific treatment by the parties is as follows:

First, shareholders A, C, and D who have reached agreement apply special tax treatment and temporarily do not recognize equity transfer income, while shareholder B should handle tax treatment in accordance with the relevant provisions on individual income tax.

Second, the assets and liabilities transferred by the merged enterprise corresponding to the equity held by resident enterprise shareholders who have reached agreement shall apply special tax treatment, with no transfer income recognized in the current period, while the remaining portion shall apply general tax treatment, with transfer income recognized in the current period. Shareholders A, C, and D together hold 60% of the equity, so 60% of the assets and liabilities transferred by Enterprise B shall apply special tax treatment, with no income recognized in the current period, and the remaining 40% shall recognize transfer income of RMB 3.2 million in the current period [(1800-1000)×40%].

Third, the tax basis of the assets and liabilities acquired by the merging enterprise corresponding to the equity held by resident enterprise shareholders that have reached agreement applies special tax treatment, with the tax basis confirmed according to the original tax basis of the merged enterprise, while the remaining portion applies general tax treatment, with the tax basis confirmed at fair value. The tax basis of the 60% portion of Enterprise B's assets and liabilities acquired by Enterprise A is 6 million yuan (10 million × 60%), and the tax basis of the remaining 40% portion is 7.2 million yuan (18 million × 40%).

IV. Where the parties to a merger have reached agreement on the portion subject to special tax treatment and the remaining portion is subject to general tax treatment, how should the merging enterprise handle the tax treatment of the assets and liabilities acquired that are subject to general tax treatment?

According to general taxation rules, after the assets and liabilities of the merged enterprise respectively apply special tax treatment and general tax treatment, the tax basis shall be recognized separately by individual asset and liability at the level of the merging enterprise. For example, in Case 2, assuming the tax basis of a certain asset of Enterprise B is 1 million yuan and its fair value is 2 million yuan, the tax basis of the asset acquired by Enterprise A is 1.4 million yuan (100×60% + 200×40%). Considering that some enterprise mergers involve a large number of assets and liabilities, the accounting burden on enterprises would be relatively high under the above method. To reduce the accounting burden on enterprises, the Announcement clarifies that enterprises may choose a simplified calculation method: where the assets and liabilities acquired by the merging (dividing) enterprise under the preceding paragraph apply general tax treatment, they may choose to recognize the tax basis according to the original tax basis of such assets and liabilities, and separately treat the difference between the corresponding fair value and the original tax basis as an asset, which shall be evenly amortized and deducted before tax over 10 years starting from the year to which the restructuring date belongs. Once this method is chosen, it cannot be changed.

Case 3: Continuing from Case 2, the tax basis of the assets and liabilities acquired by Enterprise A under general tax treatment is RMB 7.2 million (18 million × 40%). The tax basis may be determined separately for each asset and liability, or a simplified calculation method may be chosen: for the original tax basis of RMB 4 million (10 million × 40%), it continues to serve as the tax basis of the assets and liabilities acquired by Enterprise A; for the difference of RMB 3.2 million (7.2 million - 4 million) between fair value and original tax basis, it is treated as a packaged asset and uniformly amortized over 10 years starting from the year of the restructuring date, and deducted before tax.

V. In an enterprise merger, where resident enterprise shareholders that have reached a unanimous tax treatment hold an aggregate equity ratio exceeding 50%, but resident enterprise shareholders holding no less than 5% or the top ten resident enterprise shareholders have not reached unanimity, can the special tax treatment apply to the portion that has reached unanimity?

For special tax treatment applied in accordance with Article 1 of the Announcement, resident enterprise shareholders holding no less than 5% on the restructuring date, as well as the top ten resident enterprise shareholders, shall all reach agreement on applying special tax treatment. Conversely, if in an enterprise merger business the resident enterprise shareholders that agree on tax treatment hold more than 50% in total, but there are resident enterprise shareholders holding no less than 5% or top ten resident enterprise shareholders that have not agreed on tax treatment, the portion that has agreed on tax treatment cannot apply special tax treatment either.

Case 4: Enterprise A is a listed company and plans to absorb and merge Enterprise B. Enterprise B has 14 shareholders in total, of which shareholder C is a natural person, shareholder N is a partnership enterprise, and the remaining shareholders are resident enterprises. The shareholding ratios are as follows:

According to "Enterprise Income Tax Law of the People's Republic of China" and its implementing regulations,Notice of the Ministry of Finance and the State Taxation Administration on Several Issues Concerning the Treatment of Enterprise Income Tax in Enterprise Reorganization Business(Cai Shui [2009] No. 59),Notice of the Ministry of Finance and the State Taxation Administration on Issues Concerning Enterprise Income Tax Treatment to Promote Enterprise Reorganization(Cai Shui [2014] No. 109) and other documents, the relevant collection and administration issues concerning income tax treatment of enterprise restructuring are hereby announced as follows:

I. For enterprise merger and division transactions, if resident enterprise shareholders of the merged (divided) enterprise whose total shareholding ratio exceeds 50%, together with the merged (divided) enterprise and the merging (dividing) enterprise, reach agreement on applying special tax treatment, the equity held by the shareholders that reached agreement and the assets and liabilities transferred by the merged (divided) enterprise corresponding to the equity, and the assets and liabilities acquired by the merging (dividing) enterprise may apply special tax treatment; the equity held by the remaining shareholders and the assets and liabilities transferred by the merged (divided) enterprise corresponding to the equity, and the assets and liabilities acquired by the merging (dividing) enterprise shall all apply general tax treatment.

If the assets and liabilities acquired by the merging (splitting) enterprise in accordance with the preceding paragraph are subject to general tax treatment, it may choose to recognize the tax basis according to the original tax basis of such assets and liabilities, and separately treat the difference between the corresponding fair value and the original tax basis as an asset, amortized evenly before tax over 10 years starting from the year of the restructuring date. Once this method is chosen, it cannot be changed.

II. Where special tax treatment applies under Article 1, resident enterprise shareholders holding no less than 5% of the equity of the merged (or split) enterprise on the restructuring date, as well as the top ten resident enterprise shareholders, shall all reach agreement on applying the special tax treatment, and shall not transfer the acquired equity within 12 consecutive months after the restructuring. If the aforementioned shareholders transfer equity within 12 months after the restructuring, the conditions for applying the special tax treatment are no longer met. Where the special tax treatment has already been applied, the parties shall make adjustments in accordance with the regulations.

Besides the aforementioned shareholders, if other shareholders who reached agreement transfer equity within 12 months after the reorganization, causing the combined shareholding ratio of those who reached agreement to no longer exceed 50%, the special tax treatment cannot apply, and the parties shall make adjustments as required.

III. The shareholders of the merged enterprise in a merger and the shareholders of the split enterprise in a split may be natural persons, partnership enterprises, contractual asset management products, or non-resident enterprises. The above shareholders shall handle income tax in accordance with current provisions.

IV. This announcement applies to enterprise reorganization transactions with a reorganization date on or after January 1, 2026. Other tax administration issues concerning income tax treatment of enterprise reorganization transactions shall be handled in accordance with Announcement of the State Taxation Administration on Issuing the Measures for the Administration of Enterprise Income Tax for Enterprise Reorganization Transactions(No. 4 of 2010),Announcement of the State Taxation Administration on Several Issues Concerning the Administration of Enterprise Income Tax Collection for Enterprise Reorganization Transactions(No. 48 of 2015) and other provisions.

Hereby announced.

State Taxation Administration

July 8, 2026