(财政部、国家税务总局关于企业改制重组有关土地增值税政策的通知)

Following the State Council’s call to introduce policies to promote corporate restructuring in Guofa [2014] No. 14, MoF and SAT released Caishui [2015] No. 5 (“Circular 5”) to temporarily exempt the following corporate transactions from land value-added tax (“land VAT”):

  1. Transforming, under Chinese Company Law, (i) unincorporated enterprises into limited liability companies or joint-stock corporations, (ii) limited liability companies into joint-stock corporations and (iii) joint- stock corporations into limited liability companies, where all the original enterprise’s rights and obligations are inherited and the investors are the same.
  2. Merging two or more enterprises into one enterprise according to the law or as agreed in a contract, where the original investors are the same.
  3. Splitting an enterprise into two or more enterprises according to the law or as agreed in a contract, without changing the original investors.
  4. Entity’s or individual’s contribution to an enterprise of titles of land use rights or housing in a corporate restructuring process.

The temporary exemption covers January 1, 2015, to December 31, 2017, and implies that transferring titles of land use rights and housing to the enterprise or enterprises resulting from the restructuring does not trigger land VAT.

In subsequent transfers of the title of land use rights, the original price and expenses paid for the rights before the restructuring will be deductible when calculating land VAT.

These preferential land VAT policies do not apply to real estate development enterprises.

Date of issue: February 2, 2015. Effective date: January 1, 2015.