Income Tax Policy Research On Geely Buying Volvo

As China applied overseas investment strategy of "out", more and more enterprises in China are looking on the overseas market and actively participating in overseas mergers and acquisitions, achieving industrial structure adjustment and upgrading, and improving competitiveness in international markets. Tax benefits are not the main reason for M&A, but tax costs are important problems which transaction entities have to consider. Tax policy plays an important role in controlling operating costs and investment risks, also effectively guides enterprises to reduce the tax burden and seek maximum benefits in all aspects of M&A. Therefore, as an important consideration for overseas M&A, tax policy has a crucial role in better use of foreign resources and markets, expanding overseas business and promoting enterprise development.In this paper, based on Geely buying Volvo, the theoretical foundation of tax policy in overseas M&A are introduced and analyzed firstly. Then profiles of Geely buying Volvo are introduced, including transaction subjects, backgrounds and courses, as well as the income tax policy applicable for Geely buying Volvo, including income tax policy during the M&A and post merger integration, such as special tax treatment, thin capitalization, system of tax credits, tax agreements, tax managements and other provisions. Next, based on the problems Geely encountered in M&A, we analyzed the lack of income tax policy, mainly about the narrow scope of the special tax treatments, inadequate tax credit system, unknown tax treatments of financing charges, the lack of capital gains tax, inadequate signed tax treaties and defects of tax collection and services. Finally, drawing the revelations from the case, efforts should be made on overseas acquisitions tax, tax agreements and tax managements. The specific suggestions are given:improving the level of M&A tax legislation, broadening special tax treatments, standardizing the deduction of financing costs, establishing the system of capital gains tax, improving the tax sparing system, speeding up the signing and implementation of the tax treaty, establishing a specialized agency managing international tax sources and tax information sharing system.