Business Restructuring is a popular strategy for firms to adopt for the purpose of improving financial position, gaining a competitive advantage in the industry and ultimately realising individual company’s specific corporate objectives. Some common methods of business restructuring include expanding business scope, changing operational locations and adopt workforce reform. Despite timing and practicality being major considerations in conducting business restructuring, taking tax issues into consideration is also crucial. The tax policies of a firm’s operating country determine the suitability of adopting different reorganisation methods as well as the reorganisation costs of businesses.
Therefore, successful business restructuring requires companies to have an in-depth understanding of the local tax code to execute adequate restructuring activities and at the same time minimise tax expenses. In reality, many business reorganisation practices fail due to inefficiencies in their tax planning. For companies in China, the restructuring-related tax issues can be quite complicated. China, as an emerging market, is constantly changing its tax regulations to compensate its economic development goals. This means firms’ restructuring plans have to take account such rapid changes and plan ahead to assure the restructuring is still beneficial even when taxation rules change. Further, the State Administration of Taxation (SAT) has released sophisticated tax treatments and regulations targeting specific restructuring activities. According to Caishui No.59, organisations need to categorise themselves as entities suitable for adopting either general tax treatment or special tax treatment for Corporate Income Tax. This is based on their particular restructuring practices and the way of conducting those activities. Corporations, especially FIEs, need tax experts’ to help calculate required taxes accurately.
Such sophisticated Chinese tax regulations are undoubtedly challenges for corporations when reorganising businesses. LehmanBrown International Accountants can support your business restructuring by providing tax advisory services for your restructuring plan. We have extensive knowledge and experiences with the China regulations and can give you valuable advice that will aid you for an effective reorganisation. Whether you have a local or foreign-registered company, we can provide you with useful information that is applicable to your business category and entity type. Our trustworthy professionals will provide you with excellent services and help you to grow as a successful business.
For more information about business restructuring and other tax consulting services that LehmanBrown can offer, please see relevant webpages.
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