Tax Arrangements For Asset Appreciation Of Enterprise Assets

For the tax treatment of assets appreciation in the process of reorganization and restructuring, the existing enterprise income tax policy has certain "selectivity", and enterprises can choose different ways of tax treatment according to their own circumstances.

The basic case of A is absorbed by B company.

The fair value of net assets before A merger is 100 million yuan.

B company's net assets book value is - 10 million yuan, the assessed value is 2 million yuan (the value added part is mainly real estate), before the merger, there is a deficit of 15 million yuan that has not been made up (not exceeding the 5 years' compensation period stipulated by the tax law).

The amount of non equity payment in the process of enterprise merger is 0, and the annual taxable income of A company is estimated to be 10 million yuan after the merger.

The notice of the State Administration of Taxation on the issue of income tax related to the merger of enterprises ([2000]119) stipulates: 1. the merger of enterprises, usually, the merged enterprises should be treated as a fair value pfer, disposing all assets, calculating the pfer of assets, and paying income tax according to law.

The losses in the previous year of the merged enterprises shall not be pferred to the merged enterprises to make up for them.

When a merger company accepts the assets of the merged enterprise, it can determine the cost according to the value recognized by the appraisal; 2. the combined purchase price paid by the merged enterprise to its shareholders or its shareholders, except cash other than the shares of the merged company, and the value of the securities and other assets (i.e. non equity payment), is not higher than the 20% of the par value of the shares paid (or the book value of the capital stock paid). After the tax authorities have examined and confirmed, the parties may "choose" to deal with the income tax according to the following provisions: the merged enterprise does not recognize the proceeds or losses of the pfer of all assets, and does not calculate the income tax.

If the loss of the previous year of the merged enterprise fails to exceed the statutory remedial period, it can be made up for the merger enterprise to continue to make use of the income related to the assets of the merged enterprise in accordance with the regulations, and the tax cost of the merged enterprise to accept all the assets of the merged enterprise must be determined on the basis of the original book value of the merged enterprise.

According to the document No. [2000]119 issued by the State Administration of Taxation, A company absorbs and combines B company with two tax treatment plans.

Because the proportion of non equity payment in this case is 0 (less than 20%), B company can not confirm the pfer of assets, and its losses can be made up by the consolidated A company to make use of the income related to the net assets of the B company after the year to be realized. The tax cost of A's acceptance of all assets of B company must be determined on the basis of the original book value of B company.

Plan two: taxable merger.

When the proportion of non equity payment is less than 20%, the [2000]119 is stipulated as "optional" tax-free merger. Therefore, A company and B company have the right to choose tax treatment according to the first provisions mentioned above.

B company may consider pferring all assets in accordance with the fair value, calculating the pfer of assets and paying income tax according to law. The loss of B company in the previous year shall not be pferred to the A company after the merger. The A company accepts the assets of B company, and assesss the value of the assets to be determined according to the assessed value.

Comparison of schemes: 1. company B does not recognize income from assets pfer and does not pay corporate income tax.

In the second plan, B company must confirm that the proceeds from the pfer of assets are 12 million yuan [200 - (1000)], but the proceeds from the pfer of the assets can be used to make up for the previous year's loss (1200<1500) and do not need to bear corporate income tax. The loss of the B company in the 2. scheme can be pferred to the merged A company to make up for it, but the fair value of B's net assets only accounts for 2%[200 (10000+200) x 100%] of the fair value of the net assets of the merged A company. After the merger, it can only make up the deficit of 200 thousand yuan (1000 x 2%) each year, considering the pre tax compensation period, and the 15 million yuan loss of the company before the merger, which can only make up 1 million yuan before the merger.

The loss of the B company in the second plan of the company shall not be pferred to A company to make up for it. In the 3. scheme 1, the A company accepts the assets of B company only according to the original book value of the B company to extract depreciation (or amortization, the same below) before tax deduction.

In plan 2, A accepts the relevant assets of B company to extract depreciation before tax deduction according to the valuation value.

It can be seen that in this case, no matter what merger scheme is adopted, B company does not need to bear corporate income tax.

The advantage of plan 1 is that the A company can make up the deficit of B company before tax by about 1 million yuan after the merger. The advantage of scheme two is that the A company can make more than 12 million yuan depreciation before tax, so it is obvious that plan two is superior to plan 1.

In the process of enterprise merger, the choice of value-added tax treatment plan is often overlooked.

In most cases, the tax burden of tax exemption is lower than or equal to taxable merger. However, when certain conditions are met, enterprises can also choose taxable merger by themselves, so as to pay more depreciation of fixed assets and intangible assets amortization before taxes.

It should be noted that if B company fails to make up the deficit before tax, it should choose tax exemption.

Although A company obtains the assets of B company, it can only extract depreciation from the original book value of B company before tax, but B company can avoid undertaking the enterprise income tax that should be borne by the pfer of assets.

The benefits of the tax exemption merger can be understood as a delay in the timing of corporate income tax liability.

When choosing a tax exemption merger, if B company shareholders need to pay cash, A company can first pay B shareholders' equity to achieve tax exemption and merge, then B shareholders will pfer the shares acquired to shareholders of A company to obtain cash.

A case study commented on the relationship between brothers and sisters. They mean mutual help and mutual affection.

This plan is for military purposes. It refers to the strategy of winning a big victory at a small price when the enemy and the two sides are evenly matched or the enemy is inferior to us.

For instance, the story of Sun Bin's horse racing is well known, and his horse in Tian Ji's overall condition is not as good as the other side, so that he still wins two to one.

When choosing tax exemption or merger, we need to compare the following three indicators: first, the enterprise income tax that needs to be paid in the merger process; two, the loss that can be made up after the merger; and the three is the tax cost of the assets after the merger.

After comparing and analyzing the three indicators, we conclude that we should still choose the taxable merger when we meet the tax exemption conditions. The principle is to give up the small profits to make up for the losses and get the greater benefit of the pre tax depreciation.

This principle is basically the same as the strategy of "Li Ying Dai".

In addition to the merger of enterprises, in addition to the merger and reorganization of assets and the replacement of assets, the valuation of the assets can also be chosen according to the above example.