Article 4 of the Notice of State Taxation Administration of The People's Republic of China of the Ministry of Finance on Several Issues Concerning the Treatment of Enterprise Income Tax in Enterprise Restructuring Business (Caishui [2009] No.59) stipulates that in addition to the special tax treatment provisions stipulated in this Notice, enterprise restructuring shall also be subject to tax treatment in accordance with the following provisions:
(four) the merger of enterprises, the parties should be handled in accordance with the following provisions:
1. The merged enterprise shall determine the tax basis to accept the assets and liabilities of the merged enterprise according to its fair value.
2. The merged enterprise and its shareholders shall be subject to income tax treatment according to liquidation.
3. The losses of the merged enterprise shall not be carried forward to make up in the merged enterprise.
Article 6 stipulates that if the enterprise reorganization meets the conditions stipulated in Article 5 of this notice, both parties to the transaction may make special tax treatment on the equity payment part of their transaction according to the following provisions:
(4) For business combination, if the amount of equity payment obtained by the shareholders of the business combination is not less than 85% of the total transaction payment, and the business combination under the same control fails to pay the consideration, it can be handled in accordance with the following provisions:
1. The tax basis for the merged enterprise to accept the assets and liabilities of the merged enterprise shall be determined by the original tax basis of the merged enterprise.
2. The related income tax matters before the merger of the merged enterprise shall be inherited by the merged enterprise.
3. The loss limit of the merged enterprise that the merged enterprise can make up = the fair value of the net assets of the merged enterprise × the interest rate of the longest-term national debt issued by the state at the end of the year when the merged enterprise occurs.
4. The tax basis for the shareholders of the merged enterprise to obtain the equity of the merged enterprise shall be determined by the tax basis for the original equity of the merged enterprise.
Item (2) of Article 5 of the Notice of State Taxation Administration of The People's Republic of China of the Ministry of Finance on Several Issues Concerning the Treatment of Enterprise Income Tax in Enterprise Liquidation Business (Caishui [2009] No.60) stipulates that the remaining assets distributed by the shareholders of the liquidated enterprise are equivalent to the accumulated undistributed profits and accumulated surplus reserves of the liquidated enterprise, and shall be recognized as dividend income; If the balance of the remaining assets after deducting dividends exceeds or is lower than the investment cost of shareholders, it shall be recognized as the gain or loss of shareholders' investment transfer.
The assets distributed by the shareholders of the liquidated enterprise from the liquidated enterprise shall be taxed according to the realizable value or the actual transaction price.
According to the above provisions, there are two different ways for the parent company to absorb the merged subsidiaries.
1. General tax treatment. The parent company shall determine the tax basis to accept the assets and liabilities of its subsidiaries at fair value. Subsidiaries shall be subject to income tax treatment according to liquidation. If the amount of remaining assets shared by the parent company is equivalent to the accumulated undistributed profits and accumulated surplus reserves of the liquidated enterprise, it shall be recognized as dividend income; If the balance of the remaining assets after deducting dividends exceeds or is lower than the investment cost of shareholders, it shall be recognized as the gain or loss of shareholders' investment transfer.
2. Special tax treatment. The tax basis at which the parent company accepts the assets and liabilities of the subsidiary is determined by the former tax basis of the subsidiary. Subsidiaries do not need liquidation for income tax treatment. The related income tax matters before the merger of subsidiaries are inherited by the parent company.
What is the process of absorbing and merging wholly-owned subsidiaries?
1. The board of directors proposes a merger plan;
2. The shareholders' meeting voted to pass the merger resolution;
3. Sign merger contracts with wholly-owned subsidiaries, and prepare balance sheets and property lists;
Fourth, execute the creditor protection procedure;
Verb (abbreviation of verb) The company goes through the formalities of change, and the wholly-owned subsidiary goes through the formalities of cancellation.
According to Article 172 of the Company Law, the merger of companies can take the form of absorption merger or new merger. A company absorbs other companies for merger, and the absorbed company is dissolved. When two or more companies merge into a new company, the merging parties are dissolved.
The above information is our explanation of the tax treatment of the parent company's absorption and merger of wholly-owned subsidiaries. Through such a detailed explanation, everyone must have mastered the tax treatment of the parent company's absorption and merger of wholly-owned subsidiaries. In addition, the process of Bian Xiao's extension absorption and merger of wholly-owned subsidiaries is introduced for reference only!