China M&A Tax Issues - Installment 3: Mergers and Special Purpose Vehicles

Mergers

A merger involves two or more enterprises forming a single legal entity through combining their assets and liabilities. In China, the absorption of an existing company or the creation of a new entity are the two methods through which a merger can be transacted. Though the former resembles an acquisition, different tax rules apply if the transaction is recognized as a merger......

......Special Purpose Vehicles

A Special Purpose Vehicle (SPV) is a subsidiary entity of an enterprise established to achieve specific objectives such as isolating the parent company from risk or accumulating tax benefits as a result of treaties between China, in this case, and the SPV’s jurisdiction of incorporation.

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