Research On Income Tax Planning In Mergers And Acquisitions

With the rapid development of China’s economy in recent years, M & A has been an essential part of the market economy. The economic market is subject to fierce competition, M&A is one of effective means to cope with it. Enterprises can expand themselves and readjust the industrial set-up rapidly with low cost by M&A, which can help enterprises remove barriers to enter a new industry and improve their core competitiveness. However, the greater enterprises make, the more profit will be achieved at the same time; and the income tax that companies have to contribute will be also more undoubtedly. Therefore, the business income tax has been an important factor which influences the enterprises’ realization of economic goals. As the main component of restructuring charges and merger expenses, the business income tax becomes an essential aspect which enterprises must take into consideration when they make decisions on M&A. For the sake of the fact that the profit after tax can be increased properly and legally by tax planning, more and more enterprises are choosing to apply the strategy.In order to encourage corporate restructuring and accelerating the rational allocation of resources, the Chinese Ministry of Finance issued series of new policy on corporate restructuring business. The income tax policy about M&A which has become more comprehensive and unified provides a legal guarantee of tax planning in M&A.The main purpose of this study is to come up with a corresponding tax plan through the analysis of income tax cost in M&A of Chinese companies. The feasibility of M&A income tax planning is demonstrated by theory as well as practice. On this basis, this study makes a few positive discoveries in the subject of corporate M&A income tax planning, which can help companies conduct lawful, scientific and comprehensive tax planning, make better use of the national tax policy and achieve full and legitimate tax benefits and facilitate the smooth implementation of M&A schemes, so as to eventually realize coordinated growth of both economic interests of companies and tax revenue of the government.The article introduces the practical significance of income tax planning in M&A and the income tax planning techniques at first. Secondly, it discusses the general work flow and essentials of implementation of tax planning, the common elements which influence the business income tax, focus on the available options in tax planning about mergers and acquisitions and the different choices of tax planning in M&A. Last chapter presents a comprehensive case study, analyzes the tax costs of each program, and then proposes some advices about tax planning.