The Ministry of Finance ("MOF") and the State Administration of Taxation ("SAT") have recently distributed the Circular on Renewing the Land Appreciation Tax Policy for Corporate Restructuring and Reorganization (the "Circular"), valid from January 1, 2018 till December 31, 2020.
The Circular expressly states that, where an enterprise is restructured, merged or divided, the transfer of the original enterprise's real property to or the registration of the ownership of such real property under the name of, the enterprise which survives after the restructuring, merger or division, is temporarily exempt from land appreciation tax. Where an entity or an individual makes investment with the real property to acquire shareholding, at the time of restructuring or reorganization, the transfer of such real property to or the registration of the ownership of such real property under the name of, the invested enterprise, is temporarily exempt from land appreciation tax as well. However, the aforesaid policy does not apply under any circumstance where a party involved in the transfer of real property is a real property developer. In addition, the Circular notes that, where a restructured or reorganized enterprise transfers the right to use the State-owned land and files a return for land appreciation tax, the payment made before the restructuring or reorganization to acquire the right to use a parcel of State-owned land, plus relevant fees paid under unified rules of the State, may be deductible as the "amount paid by this enterprise to acquire the land use right".