The State Administration of Taxation (SAT) recently issued SAT bulletin [2014] No. 29 to clarify several issues relating to taxable income under the Enterprise Income Tax (EIT) Law. Among others, article 2 of bulletin No. 29 clarifies the tax treatment of an asset contribution.
Article 2 provides that assets or shares received by an enterprise from its shareholders for free will not be treated as taxable income of the enterprise if the enterprise has booked the assets or shares received as capital (including capital surplus) as agreed in the contract or agreement.
Business Law Digest is compiled with the assistance of Baker & McKenzie. Readers should not act on this information without seeking professional legal advice. You can contact Baker & McKenzie by e-mailing Danian Zhang (Shanghai) at: danian.zhang@bakermckenzie.com
