For the first time ever in Canada, super-priority rights have been given to employees which will take priority over existing secured creditors.

财政部国家税务总局关于个人非货币性资产投资有关个人所得税政策的通知)

On March 30, 2015, the Ministry of Finance (“MoF”) and the SAT jointly released Caishui [2015] No. 41 (“Circular 41”) to expand nationwide the tax payment installment policy applicable in the Shanghai Free Trade Zone to income derived from non-monetary asset investment made by individuals.

Circular 41 defines non-monetary asset investment and includes the contribution of non-monetary assets to establish a new company, to participate in company capital increase, private placement of stock, stock exchange and corporate restructuring.

Key Points

• Announcement 72 to elaborate on how the cross-border equity transfer can qualify for the special tax treatment
• Clarifies the rules to ensure no tax-avoidance purpose would be involved in the restructure as well as sets forth the rule on relevant filing procedures

Background

On April 30, 2009, the Ministry of Finance (“MOF”) and the State Administration of Taxation (“SAT”) jointly issued Caishui [2009] No. 59 (“Circular 59”) to set out the guidelines on the income tax treatment of enterprise reorganizations (please refer to our China Tax Bulletin May 2009 for more information about Circular 59).

New tax rules relating to the tax treatment of certain corporate restructuring transactions are expected to be finalized soon by the PRC Ministry of Finance (“MOF”) and the State Administration of Taxation (“SAT”).

Tax authorities have perceived recently that international corporate groups are going through internal business restructurings in large part or in whole to achieve income tax savings.

Background:

Tax treatment in the hands of the creditor

The waiver of an outstanding debt by a creditor shall be treated as an extraordinary loss for accounting purposes. As taxable income for corporate income tax purposes is calculated from the company’s accounting results assessed upon accounting regulations, such loss is normally deductible unless income tax law provides for an adjustment.

On February 25, 2020, in Rodriguez v. Federal Deposit Insurance Corporation, No. 18-1269 (U.S. 2020), the U.S. Supreme Court effectively ruled that the so-called “Bob Richards rule” should not be used to determine which member of a group of corporations filing a consolidated federal income tax return is entitled to a federal income tax refund.

On February 25, 2020, the United States Supreme Court in Rodriguez v. Federal Deposit Insurance Corporation^[1] struck down a judicial federal common law rule—known as the Bob Richards rule—that is used by courts to allocate tax refunds among members of a corporate affiliated group where the group does not have a written tax sharing agreement in place, or, at least in some federal Circuits, where an agreement fails to allocate the refunds unambiguously.