China Tax Alert - Issue 2, January 2015
The Ministry of Finance and the State Administration of Taxation released Caishui  No.109 “Circular on Corporate Income Tax Treatments to Encourage Corporate Restructuring” and Caishui  No.116 “Circular on Corporate Income Tax Treatments on Investment with Non-Monetary Assets” in December 2014.
The two circulars clarify further on the special restructuring under Caishui  No.59 (relaxing the ration limit for share/asset acquisition and broadening the scope of special restructuring) as well as investment with non-monetary assets. The release of the two circulars is a significant improvement to corporate restructuring and investment activities.
When conducting internal restructuring and investment activities, PRC entities should refer to the two circulars to optimize their restructuring and investment scheme in order to take advantage of the favorable tax treatments.