Income Tax on Equity Investments and M&A Activities

February 28, 2001 | BY

clpstaff &clp articles

On June 21 2000, the State Tax Bureau of the PRC issued the Several Income Tax Questions Concerning Enterprise Equity Investments Circular, Guo Shui Fa…

On June 21 2000, the State Tax Bureau of the PRC issued the Several Income Tax Questions Concerning Enterprise Equity Investments Circular, Guo Shui Fa No. (2000) 118 (the Notice). The Notice sets up some stringent criteria in taxing the income arising out of the equity investments or mergers and acquisitions made by Chinese companies.

Dividends

According to the Notice, the income of an investment shall include all the accumulated undistributed profit (after income tax of the investee) and the dividends distributed from the investee's general reserve1, whether in the form of monetary assets or non-monetary assets.

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