Research On Income Tax Policies Of Tax-Free M&As In China

Mergers and acquisitions (M&As) are the effective ways to make enterprise strengthen the resource integration and improve competitiveness, and they are also an important way for markets to adjust and optimize the allocation of resources. Recently, problems of the non-reasonable industrial structure in China have become increasingly prominent. And the problems of excess production capacity and low quality and efficiency development are urgent to be solved. Under the background of optimization and upgrading of industrial structure and transformation the mode of economic development, it is very urgency to promote enterprises to actively participate in M&As.As an important factor that affects the industrial M&As bchavior. tax policy has a great influence on M&As decisions, transaction implementation, and M&As results. Among the taxes involved in M&As, income tax is the most complex and the influence of income tax is greatest than other factors. Therefore, income tax. especially tax relief policy has become an important factor during the M&A process. Considering the problems existed in the duty-free tax policy of M&As in China, combing with the current situation of the economy development, the thesis proposes some relevant suggestions to optimize and improve the current tax policy, and the contents in the thesis can also provide references for the government departments to formulate policies.As a way of preferential tax policies, income tax policies of tax-free M&As reflects the encouragement and promotion of M&As that contribute to the adjustment and optimization of resources. Income tax expense is an important part of the cost during M&As process, and has a significant impact on the decision and payment of M&As. Based on the results of field research and statistics of China M&As market from2006to2012, it can find that there are some defects in China’s income tax policies of tax-free M&As. The main problems existed in the income tax policies of tax-free M&As in China are summarized as follows:the type of tax-free transaction is less; the applicable condition is high; the regulation of non-monetary investment enterprise income is not clear; definition of the trade subject and the share-based payment concepts are ambiguous; regulations of duty-free tax policy of M&As is non-reasonable.By comparing duty-free tax policies of M&As in developed countries represented by United States, Germany, and Japan, it can find that the development process of the tax policies in developed countries has a close combination with guidance of the government industrial policy. It also has the value orientation of encourage mergers and acquisitions. Furthermore, the prefect and detailed regulations of the M&As has stronger practical guidance.Based on the research above, the thesis proposed that the value orientation duty-free of income tax policy of tax-free M&As in China should encourage M&As activities and carry a balance between national finance income and the economic growth brought by industrial restructuring effects of M&As. Regulation of tax policy should be in harmony with the industrial policy, identify key issues to be addressed and improved tax policy rule set and coordinate tax collection. Meanwhile, the design of duty-free policy should insist on the principles of the combination of tax neutrality with tax regulations, tax fairness and substance is more important than formal. Combined with the experience of developed countries as well as the calculation of income tax during the M&As process from2010to2012, the thesis suggests that during the design of duty-free income tax policy, the key problem to be addressed is to enlarge the trade range of the tax-free M&As, reduce the requirements of the proportions of stock acquisition and stock payment and give tax incentive to the non-monetary assets investment income. At the same time, it also suggests that during the process of handling the M&As income tax treatment, the regulations of the M&As trade forms involving multi-subjects and the concepts of stock payment should be clear. The research perspectives and methods in the thesis are different from the previous researches on M&As tax policy. The previous literatures are in the positions of the industries to research how to use the tax policy for tax planning, however, the thesis is under the perspective of the government policy formulation to research how to optimize and improve the current duty-free income tax policy of M&As. in fields of research method, the thesis is based on the large sample data statistics, the problems existed in the current duty-free tax policy of M&As are validated by the large sample data, and some suggestions of applicable conditions to appropriately reduce duty-free tax policy of M&As are presented in the thesis.