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China Offers Corporate Debt Restructuring Incentives

by Mary Swire, Tax-News.com, Hong Kong

08 December 2016


In a notice issued on December 6, China's Ministry of Finance provided details of the preferential tax breaks to be given to companies engaged in debt-reducing corporate restructurings.

As approved by the State Council in October this year, companies going through bankruptcy, mergers and acquisitions, and/or liquidation will be able to defer corporate tax payments or pay tax in installments over five years. In addition, value-added tax will not be imposed on transfers of fixed assets and land-use rights.

The notice said that the tax policies are to be implemented in order to help lower the costs and create a favorable environment for corporate deleveraging, and particularly for the adoption of market-oriented debt-for-equity swaps or asset securitizations.

The State Council's guidelines had stressed that the Government would provide such incentives only to promising companies with short-term difficulties, and not to loss-making "zombie" companies. It would also not intervene in any company's restructuring process.

TAGS: tax | business | value added tax (VAT) | banking | capital markets | corporation tax | China | ministry of finance | tax breaks

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