What’s New?
On July 31, 2026, China’s Ministry of Finance, State Taxation Administration, NDRC, and Ministry of Industry & Information Technology issued 公告2026年第23号, introducing a tax policy for non-monetary asset exchanges by integrated circuit (IC) and industrial mother machine enterprises. (shanghai.chinatax.gov.cn)
Key features:
- Period: from January 1, 2026 through December 31, 2028.
- Qualified enterprises that conduct non-monetary asset exchanges may defer recognizing the resulting income over up to 5 years, spreading the inclusion of taxable income evenly.
- Losses from such exchanges cannot be deferred.
- Enterprises subject to list-management must annually certify eligibility by end of March via NDRC and MIIT. Non-list firms are subject to eligibility checks by tax authorities.
- Existing policies on non-monetary asset investment and corporate restructuring are preserved and may be chosen instead. (shanghai.chinatax.gov.cn)
Who is Impacted?
- IC and industrial mother machine companies that either are on the preferential list-managed roster or can be verified via government authorities.
- Suppliers, partners, or business combinations that might exchange equipment, IP, plant/facilities or technology as part of non-cash arrangements.
Practical Planning Advice
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Identify eligibility early: Determine whether your entity is list-managed or likely to pass the audit for becoming eligible. Use prior years’ certifications and related departments to understand compliance expectations.
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Model deferred tax implications: Deferring income for up to 5 years helps cash flow, but you must forecast tax liabilities for each year. Ensure that accounting and tax teams can track the deferred amounts properly.
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Consider losses carefully: Since exchange losses cannot be deferred, avoid or limit such occurrences or ensure they are accounted for in the year incurred.
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Compare alternative policies: Investments or restructuring policies (2014 and 2016 notices) may sometimes offer better or more flexible tax outcomes depending on circumstance. Choose one policy and stick with it.
Example Scenario
Company A is an IC manufacturer on the approved list. In 2027, it conducts non-monetary asset exchange valued at ¥20 million. Under this new policy, instead of recognizing the full ¥20 million income in 2027, it records ¥4 million each year from 2027 to 2031 as taxable income. Its losses, however, must be recognized upfront if incurred.
Action Items
- Internal audit: Review past and planned asset exchanges—do they meet new policy eligibility?
- Compliance calendar: For list enterprises, ensure March submissions; for entity, set up deadlines to track deferrals.
- Financial reporting: Adjust books to split income over multiple periods and monitor deferred income disclosures.