On September 4, 2024, the Ministry of Finance and the State Taxation Administration jointly issued Announcement No. 14 on Stamp Duty Policy for Restructuring of Enterprises and Institutions. Effective from October 1, 2024, to December 31, 2027, this policy aims to simplify the stamp duty process in restructuring activities and effectively reduce the tax burden during restructuring, promoting high-quality development of enterprises.

The announcement differentiates among various restructuring situations, including enterprise restructuring, mergers, splits, asset or equity contributions and transfers, debt restructuring, and institutional reform. It makes clear the stamp duty policies and applicable conditions for business account books, taxable contracts, and property transfer documents, thus increasing the precision and effectiveness of tax policies.

Key points of booking the stamp duty policy are as follows:

  1. The policy stipulates that if stamp duty has already been paid, the new business account books of newly established enterprises in the process of restructuring will not be levied stamp duty on the recorded paid-in capital and capital surplus.

  2. In the case of debt-to-equity swaps approved by the State Council, the increased paid-in capital and capital surplus resulting from the conversion of debt to equity will be exempt from stamp duty.

   3. In restructuring, stamp duty will be imposed on the total amount of added paid-in capital (share capital) and capital surplus.

   4. Furthermore, converting funds from other accounting items to paid-in capital or capital surplus will also lead to the imposition of stamp duty.

For taxation: Regarding taxable contracts that have been concluded but not performed before restructuring, if the restructured entity takes over the contract rights and obligations without altering the tax basis, the stamp duty already paid does not need to be paid again.

In the past, similar stamp duty incentives were implemented in 2003. However, their scope was narrow, only supporting a few situations like enterprise restructuring, mergers, and splits. The new Announcement No. 14 from the Ministry of Finance and the State Taxation Administration represents a significant breakthrough as it expands the scope to include enterprise restructuring, reorganization, bankruptcy liquidation, and institutional reform, thus enhancing policy support for restructuring activities. When carrying out restructuring efforts, enterprises and institutions should closely follow policy changes and fully utilize the available tax incentives to optimize the reform process.

At PHC Advisory, we can offer you full support on matters regarding doing business in China, or any other issues your business may face. If you would like to know more about policies relevant to your business in Italy or Asia, please contact us at info@phcadvisory.com.  

PHC Advisory is a company of DP Group: an international professional services conglomerate of companies with approximately 100 experienced professionals worldwide. We offer comprehensive services in tax, accounting, and financial consulting, including financial supervision, financial audit, internal audit, internal control over financial reporting, and support for audited financial statements and annual audits, ensuring clients' financial transparency and compliance. 

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The content of this article is provided for informational purposes only, financial advice must be tailored to the specific circumstances on a case-by-case basis, and the contents of this article do not legally bind PHC Advisory with the reader in any way. 

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