This Announcement aims to address the practical difficulty in merger and division transactions where the inability to obtain unanimous consent from all shareholders—due to a large number of shareholders or complex shareholder structures—prevents the application of the special tax treatment. The key points are as follows:

1. 1. Relaxation of Shareholder Unanimity Requirement

Under the previous rules, all parties to a restructuring were required to uniformly adopt either "General Tax Treatment" or "Special Tax Treatment"; as long as a minority of shareholders disagreed, the entire restructuring business could not enjoy the deferred tax benefit under the special tax treatment.  

Under the revised rules, at the shareholder level of the merged (divided) enterprise, if the following conditions are met, the equity held by consenting resident shareholders and the corresponding assets and liabilities may separately apply special tax treatment, while the remaining portion still applies general tax treatment:

1. 1）All resident enterprise shareholders holding no less than 5% and the top ten resident enterprise shareholders must all consent; and
2. 2）The aggregate shareholding ratio of consenting resident enterprise shareholders exceeds 50%.
3. 2. Introduction of Simplified Calculation Method

Under the general tax rules, after the assets and liabilities of the merged (divided) enterprise are subject to special tax treatment and general tax treatment respectively, the tax basis shall be recognized for each individual asset and liability separately.

The new rules introduce a simplified calculation method: for assets and liabilities acquired under general tax treatment, the enterprise may elect to recognize the tax basis based on the original tax basis of such assets and liabilities, and treat the difference between fair value and original tax basis as a separate asset, which shall be amortized and deducted evenly on a pre-tax basis over 10 years starting from the year of the restructuring date. Once this election is made, it may not be changed.

3. 3. Expansion of the Scope of Shareholder Entities

According to Announcement No. 48 [2015], shareholders of a merged (divided) enterprise may include natural persons. The new rules further clarify that non-resident enterprises, partnership enterprises, and contractual asset management products are also included in the scope of shareholders for merger and division businesses. The above types of entities shall each be subject to income tax treatment in accordance with their respective current rules, and their tax treatment methods shall not affect the application of special tax treatment by resident enterprise shareholders.

4. 4. Strengthened Lock-up Period Requirements

Resident enterprise shareholders holding no less than 5% and the top ten resident enterprise shareholders may not transfer the equity acquired within 12 consecutive months after the restructuring. If the above core shareholders transfer equity within 12 months, the special tax treatment already applied by all parties must be retroactively adjusted back to general tax treatment.

In addition to the above core shareholders, if other consenting resident shareholders transfer equity within 12 months after the restructuring, causing the aggregate shareholding ratio of consenting shareholders to fall below 50%, the parties will likewise no longer meet the conditions for special tax treatment and tax adjustments must be made.

5. 5. Scope of application and effective time

Applicable transactions: Only applies to enterprise mergers and enterprise divisions. Other restructuring types such as equity acquisitions and asset acquisitions are not covered by this Announcement.

        Effective time: Applies to restructuring businesses occurring on or after January 1, 2026 (based on the restructuring date).