Research On Tax Treatment Of VAM In Stock Acquisition

In China’s capital market,more and more enterprises use equity acquisition to achieve corporate strategic development goals and expand their own business scale.In the process of equity acquisition,in order to prevent investment risks,protect its own rights and interests,and in order for the equity transferor to obtain funds in a timely manner to meet its own development needs,the two parties to the equity transaction will often sign a VAM agreement to realize the interests of both parties.With the increasing use of VAM agreements in equity acquisition activities,the tax issues faced by VAM agreements have also become apparent.At present,there are no tax treatment provisions for VAM agreements in China’s tax policy,and there is no relevant tax policy to refer to,which not only brings great uncertainty to the tax burden of enterprises,exposes them to greater tax risks,but also leads to the loss of a large amount of tax revenue in the country.Therefore,the issue of tax treatment of VAM agreements needs to be resolved urgently.The key to the tax treatment of VAM agreements lies in the nature of the performance commitment compensation received by the equity acquirer,and whether the performance commitment compensation should be determined according to the economic nature of whether income tax is levied.In the period of the gap in the tax policy of the VAM agreement,the difference in the determination of the economic nature of the performance commitment compensation between local tax authorities and tax enterprises has led to three different tax treatment methods for the follow-up treatment of performance commitment compensation: first,it is included in profit and loss and income tax is paid in the current period;The second is to adjust the initial investment cost and pay income tax when disposing of the investment;Third,it is included in the equity and still needs to pay income tax.This thesis focuses on the tax treatment of VAM agreements where the VAM entity is the equity acquirer and equity transferor,and the performance promise is the equity transferor,and through the analysis of the tax treatment under different economic properties and the specific cases of Shuanglin Co.,Ltd.’s acquisition of 100% equity of Shanghai Chengye,it is concluded that the economic essence of the VAM agreement is a valuation adjustment mechanism,and the performance commitment compensation should be regarded as an adjustment of the initial investment cost,and income tax should be paid when the investment is disposed of.Finally,reasonable suggestions are provided to solve the tax treatment of VAM agreements: first,improve the asset appraisal system,rationally design VAM arrangements,provide reliable tax calculation basis for tax authorities,and facilitate the tax collection and management of VAM agreements;The second is to clarify the economic substance of the VAM agreement,and formulate corresponding tax policies guided by the economic substance to fill the gap in the tax policy of the VAM agreement;Third,coordinate accounting standards to comply with the economic substance of VAM agreements,standardize accounting treatment,and prevent tax risks arising from irregular accounting treatment;The fourth is to strengthen exchanges between tax enterprises,build an effective information exchange platform,reduce differences between tax enterprises,and achieve win-win tax effects;Fifth,strengthen inter-departmental cooperation,disclose information on VAM clauses,and avoid tax risks brought to enterprises by different views and information asymmetry between various departments.