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The term hybrid investments of enterprises means investments that have the
characteristics of both equity and debt investments. Hybrid investments that
satisfy all of the following conditions shall be subject to enterprise income
tax treatment. The Announcement shall be effective as of September 1, 2013. Tax
revision will not be carried out for hybrid investments that occurred and
underwent tax treatment previously.
SAT clarifies enterprise income tax treatment for hybrid equity and debt
investments.
(Issued by the State Administration of Taxation on July 15 2013 and effective as of September 1 2013.)
SAT Announcement [2013] No.41
Pursuant to the PRC Enterprise Income Tax Law and its Implementing Regulations (the Tax Laws), we hereby make the following announcement concerning the issue of the enterprise income tax treatment of the hybrid investments of enterprises:
1. The term "hybrid investments of enterprises" means investments that have the characteristics of both equity and debt investments. Hybrid investments that satisfy all of the following conditions shall be subject to enterprise income tax treatment in accordance herewith:
(1) after acceptance of the investment, the investee enterprise is required to pay at regular intervals interest at the interest rate specified in the investment contract or agreement (or, here and hereafter, pay at regular intervals guaranteed minimum interest, fixed profit or fixed dividends);
(2) there is a clear investment term or specific investment conditions, and the investee enterprise is required to redeem the investment or repay the principal upon expiration of the investment term or fulfilment of the specific investment conditions;
(3) the investing enterprise does not have ownership of the investee enterprise's net assets;
(4) the investing enterprise does not have the right to elect or be elected; and
(5) the investing enterprise is not participating in the day-to-day production and operation activities of the investee enterprise.
2. A hybrid investment complying with Article 1 hereof shall be subject to enterprise income tax treatment in accordance with the following provisions:
(1) with respect to the interest paid by the investee enterprise, the investing enterprise shall, on the date the interest is payable by the investee enterprise, confirm the realisation of the income and count it as part of its taxable income for the period in question; the investee enterprise shall confirm the interest expenditure on the date the interest is payable and deduct the same before tax in accordance with the Tax Laws and Article 1 of the State Administration of Taxation, Announcement on Several Issues Concerning Enterprise Income Tax (Announcement [2011] No.34);
(2) with respect to an investment redeemed by the investee enterprise, each of the parties to the investment shall, at the time of redemption, confirm the difference between the redemption price and investment costs as a debt restructuring loss/gain, and respectively count it as part of its taxable income for the period in question.
3. This Announcement shall be effective as of September 1 2013. Tax revision will not be carried out for hybrid investments that occurred and underwent tax treatment previously.
Announcement on the Issue of Enterprise Income Tax Treatment in Respect of the Hybrid Investments of Enterprises
China
Law & Practice
(Sep/Oct 2013): n/a.
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Abstract (summary)
Full Text
(Issued by the State Administration of Taxation on July 15 2013 and effective as of September 1 2013.)
SAT Announcement [2013] No.41
Pursuant to the PRC Enterprise Income Tax Law and its Implementing Regulations (the Tax Laws), we hereby make the following announcement concerning the issue of the enterprise income tax treatment of the hybrid investments of enterprises:
1. The term "hybrid investments of enterprises" means investments that have the characteristics of both equity and debt investments. Hybrid investments that satisfy all of the following conditions shall be subject to enterprise income tax treatment in accordance herewith:
(1) after acceptance of the investment, the investee enterprise is required to pay at regular intervals interest at the interest rate specified in the investment contract or agreement (or, here and hereafter, pay at regular intervals guaranteed minimum interest, fixed profit or fixed dividends);
(2) there is a clear investment term or specific investment conditions, and the investee enterprise is required to redeem the investment or repay the principal upon expiration of the investment term or fulfilment of the specific investment conditions;
(3) the investing enterprise does not have ownership of the investee enterprise's net assets;
(4) the investing enterprise does not have the right to elect or be elected; and
(5) the investing enterprise is not participating in the day-to-day production and operation activities of the investee enterprise.
2. A hybrid investment complying with Article 1 hereof shall be subject to enterprise income tax treatment in accordance with the following provisions:
(1) with respect to the interest paid by the investee enterprise, the investing enterprise shall, on the date the interest is payable by the investee enterprise, confirm the realisation of the income and count it as part of its taxable income for the period in question; the investee enterprise shall confirm the interest expenditure on the date the interest is payable and deduct the same before tax in accordance with the Tax Laws and Article 1 of the State Administration of Taxation, Announcement on Several Issues Concerning Enterprise Income Tax (Announcement [2011] No.34);
(2) with respect to an investment redeemed by the investee enterprise, each of the parties to the investment shall, at the time of redemption, confirm the difference between the redemption price and investment costs as a debt restructuring loss/gain, and respectively count it as part of its taxable income for the period in question.
3. This Announcement shall be effective as of September 1 2013. Tax revision will not be carried out for hybrid investments that occurred and underwent tax treatment previously.
( (c) Euromoney Institutional Investor PLC Sept 2013)
Indexing (details)
Location
Title
Announcement on the Issue of Enterprise
Income Tax Treatment in Respect of the Hybrid Investments of
Enterprises
Publication title
Pages
n/a
Publication year
2013
Publication date
Sep/Oct 2013
Year
2013
Place of publication
London
Country of publication
United Kingdom
Publication subject
ISSN
10126724
Source type
Trade Journals
Language of publication
English
Document type
News
ProQuest document ID
1441046770
Document URL
http://libproxy1.nus.edu.sg/login?url=http://search.proquest.com/docview/1441046770?accountid=13876
Copyright
( (c) Euromoney Institutional Investor PLC
Sept 2013)
Last updated
2013-10-28
Database
ABI/INFORM Complete
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