Research On Income Tax Concerning Split-off In China

As one of the important means to the legal person qualification changes,organizational structure change and corporate restructuring,the division of the company is not an idle legal system from the beginning,but is frequently used by merchants in the social economic life.Although< Notice on Several Issues Concerning the Treatment of Enterprise Income Tax in Enterprise Reorganization Business >(Fiscal and tax [2009] No.59,hereinafter referred to as Circular 59)has established a rough stipulation on the income tax concerning the corporation division,due to lack of theoretical research on both company law and tax law on,and late development of enterprises restructuring,resulting in a too strict applicable conditions,an obvious unfair tax burden on split off and split up tax,but also lack of detailed provisions on how to adjust the tax base under the circumstance of a boot exists,which inclined to a controversy in practice.The author thinks that the split-off refers to a company(hereinafter called enterprise being spun-off)to transfer some or all of the assets to the existing or newly established company(hereinafter referred to as the spin-off enterprise),and repurchase the share of original shareholders in the enterprise being spun-off with equity or boot to achieve the split-off according to law.In the course it involves the income of enterprise being spun-off by using non monetary assets to invest a company and the income of shareholders by withdrawing from or liquidating the company,which incur a double level of taxation,but in the process of split-off and split-up when the liquidation income tax rules shall be adopted,so as to meet the substantive principles of taxation and tax fairness.In addition,No.59 will not allow to adopt special reorganisation treatment unless shareholders hold the spin-off enterprise stocks at the same ratio as holding the enterprise being spun-off stocks,the provisions are so stringent that it will greatly reduce the application space of the special reorganization treatment,but also fail to coincide to other tax provisions in,it should be abolished,each shareholder only need to receive a payment in which a equity ratio account for 85%,and whether the other shareholders reach 85% will not affect him to adopt the special reorganization treatment.In determining the tax basis after the split-off,we should also consider the income of the boot at both levels of the company and shareholder,and the division of company shareholder and nature person shareholder,then use the formula to calculate the tax base.After the completion of the separation,the problem of double taxation will not exist at the level of shareholder due to the deferred tax,but on the company level,if the shareholder is a company,that there is no double taxation on general,if the shareholder is a natural person,there exists a double taxation,however this problem can not be changed under the current tax system.Finally,we confine the tax avoidance action of distributing the profit under the guise of a split-off by referring to the United States tax law 355(d),355(E),the “leveraged spin-off” in 355(E)has a similar nature of "excess debt" in one China tax draft,but we will also overcome the exceedingly complex in the US tax law,otherwise it might distort economic behavior,increase the tax compliance cost.This paper is divided into six parts:The first part is the introduction,briefly expounded the research background and significance of the split-off income tax system,the research of the scholars and the research methods of this paper.The second part combs the definition of the company in the tax law,analyzes the taxpayers and the taxable income in the Ordinary Reorganization,and finds the unfair tax burden in the existence of the separation and dissolution of the taxation.The third part introduces the "shareholder equity continuous" rule,and pose a doubt on adopting the special reorganization treatment in the proportion of the original shareholdingThe fourth part interprets the laws and regulations of the special reorganization treatment,and figure out a double taxation at the company level.The fifth part figures out the same essence of the separation and dissolution of the separation,and should adopt the same treatment in the Ordinary Reorganization,and deduce the calculation formula of the taxable income.The sixth part removed the harsh requirements of the original shareholding ratio,introduced the 355(d)and 355(e)rules of the US tax law,and made recommendations on how to regulate the post-separation transfer.The seventh part deduces the calculation formula of the tax base and boot payment,and explains the case.