Entity Setup
Optimizing Corporate Restructuring Tax Treatment for M&A Deals in China
China has eased the requirements for special tax treatment in enterprise reorganization, now allowing resident shareholders holding ≥50% to apply for deferral under certain conditions — a major shift for M&A strategy.
By NomadicTax Research Team • 6 min read • August 23, 2026
## Background
In July 2026, China introduced the **"Notice on Issues Concerning the Administration of Enterprise Reorganization Income Tax Treatment" (国家税务总局公告2026年第13号)**, which relaxed the threshold for resident corporate shareholders to be eligible for **special income tax treatment** in mergers and splits. Previously, **100% of shareholders had to agree**, which was particularly challenging for listed companies with numerous or complex shareholder structures.([fgk.chinatax.gov.cn](https://fgk.chinatax.gov.cn/zcfgk/c100012/c5251155/content.html?utm_source=openai))
## Key Changes and Implications
- From **January 1, 2026**, resident corporate shareholders holding **50% or more**—instead of previously requiring unanimous agreement—can apply for **special tax treatment** when certain conditions are met.([fgk.chinatax.gov.cn](https://fgk.chinatax.gov.cn/zcfgk/c100012/c5251155/content.html?utm_source=openai))
- Eligible transaction types include **mergers**, **splits**, or **absorptive mergers**. Special treatment covers assets/liabilities related to the restructuring that those shareholders agree on.([fgk.chinatax.gov.cn](https://fgk.chinatax.gov.cn/zcfgk/c100012/c5251155/content.html?utm_source=openai))
- The remainder of shareholders—or assets they hold—without such agreement must follow **general tax treatment**. For those parts: companies may choose to adopt the original tax basis and amortize increases in asset value over 10 years.([fgk.chinatax.gov.cn](https://fgk.chinatax.gov.cn/zcfgk/c100012/c5251155/content.html?utm_source=openai))
## Actionable Planning Advice
- **Due diligence of shareholder structure**: For listed companies with many shareholders (including natural persons, fund vehicles, non-resident entities), focus on aligning at least those accounting for 50% ownership for agreement. This significantly simplifies process.
- **Draft agreements ahead of time**: Use shareholder resolutions or protocols to document agreement among major shareholders on applying special treatment before the reorganization.
- **Amortization vs immediate taxation**: For non-agreed shareholders, weigh whether opting for general treatment and using the 10-year amortization might still offer tax benefits vs missing out on full deferral.
## Examples
- *Example 1*: Company A (listed) merging with Company B. Major shareholders controlling 55% agree to special tax treatment; remaining 45% do not. For the 55%, assets/liabilities they hold are deferred; for the 45%, general treatment with amortizable basis.
- *Example 2*: A private resident company with 60% owned by two companies and 40% by individuals. If the two companies agree but individuals do not, only the assets/ownership comprising 60% can benefit from the special regime.
## Impacts and Risks
- **High impact**: Enables more M&A activity, greater policy certainty, and reduces tax-related friction in restructurings.
- **Riskier for non-compliance**: Misalignment among shareholders or missing documentation can lead to full denial of special treatment.
**Bottom Line:** If you're planning a corporate reorganization in China — mergers, splits, absorbing or being absorbed — this policy makes it much more feasible to access favorable tax deferral options. Ensure ownership alignment ≥50%, get agreements documented early, and plan carefully with tax advisers to ensure compliance.