Tax Treatment Of Promised Compensation In Valuation Mechanism

In the transaction of mergers and acquisitions and reorganizations,both sides of the transaction disagree on the valuation of the company due to asymmetric information.In order to facilitate the completion of the transaction,the betting agreement has become a common protocol arrangement.The performance is awarded to the transferor.If the performance is not completed,the transferor must pay the compensation at the agreed amount.According to WIND statistics,the number of shares issued during the period from 2014 to 2016 totaled 803,and over 60% of companies need to fulfill performance commitments,and the number and amount of gambling agreements signed by companies are increasing.At present,there is no clear policy on how to deal with the corporate income tax issues involved in gambling agreements.The gambling agreement is widely used today.This issue is particularly important for taxation practice in China.Therefore,this article explores this issue.A key point in the compensation process for performance guarantees is whether to reconfirm and measure the compensation or to adjust the previous confirmation and measurement.Because the biggest feature of the gambling agreement is that the one-time end payment has become a cross-period exposure.Another key issue is that the tax treatment under different forms of compensation for gambling agreements is not the same.Based on the understanding of tax-related issues concerning gambling agreements,this article analyzes Gao Xinxing as a case to discuss how the compensation that the acquirer obtains from the transferor should not be taxed when the business is not completed.First,this article describes the performance non-compliance event.The tax treatment problem caused by frequent performance compensation compensation leads to the research background and significance of this paper.Secondly,it gives a full introduction to the basic situation of performance guarantee compensation,and elaborates several current views on tax treatment and other countries' practices on tax treatment of performance-compensation compensation.While reviewing and sorting out the literature at home and abroad,it discusses reasonable tax law provisions from the perspectives of laws,accounting,and taxation principles to guide the different ways in which performance promises to compensate for taxation under different forms of compensation.Finally,this article selected the representative case Gao Xinxing to acquire Chongqing Xunmei,and introduced its case background,performance guarantee compensation plan,and tax treatment of compensation received after triggering compensation,and analyzed the rationality of its taxation treatment.A comparative analysis of the differences in tax treatment under the cost adjustment method,and the tax impact of such differences,the impact on profitability and the impact on market participants,concluded that the cost adjustment method is more in line with the principles of fairness and efficiency of taxation.Conclusions and cases were reviewed.In summary,this paper summarizes the full text at the end of the paper and compares and analyzes the impact of the processing methods of companies represented by Gao Xinxing on the basis of reference to the tax treatment methods of the United States,Australia and other countries on the “competition promise compensation”.Finally,proposals for tax treatment policies that suit China's national conditions are proposed.