Tax Planning During The M&A Of Chinese Enterprises

Chinese enterprises have been experiencing rapid growth in Mergers and Acquisitions(M&A) since 1980 s. Yet for that, many M&A had to be terminated as a result of defective tax planning.As the mainstay of medical and healthcare trade, medical device industry(MDI) has demonstrated its vigour and vitality in front of us. The M&A have also became a normal activities of medical device companies. In the market environment with comprehensive tax constraint, tax factor is a primary component of externally financial environment of corporates, which poses a significant effect on operating decisions and objectives. Therefore, a deep analysis of tax will have positive and practical meaning for companies when choosing a reasonable project relating to mergers and acquisitions.My case study dissertation on Dirui-Reebio Acquisition, in which Dirui acquired 51% of Reebio’s shares, firstly elaborates the influences tax environment exerts on M&A decisions and the considerations given to both parties of M&A based on the influences. The following actual tax burden and interests analyses on both parties under different M&A patterns are provided as a reference for M&A decisions.In the end, my dissertation offers four suggestions on tax planning during the M&A of Chinese enterprises. Firstly, to avoid the hindrance of high tax burden, it is beneficial for the M&A enterprises to perform tax planning in advance during the preparation of M&A. Secondly, M&A tax planning must take many factors into consideration to maximise the interests of the shareholders. Thirdly, the special tax treatment is currently confined in a quite small range under tax laws and regulations. It will be a progress if tax authorities could broaden the range of special tax treatment during M&A. Last but not least, many enterprises know little about Chinese laws and regulations on M&A. Some of them even hold the misunderstanding that a special tax treatment equals to tax exemption, which indeed is only a kind of deferred treatment compared with a general one. Thus, M&A enterprises should learn more knowledge on tax laws and regulations.