Case of Tax Treatment Concerning Bankruptcy Reorganization

　　I. Applicant

　　C Company

　　II. Description of Matter

　　C Company filed for bankruptcy as it is unable to pay due debts and it is insolvent. The court has accepted the bankruptcy liquidation case of C Company. C Company intends to set up a wholly-owned subsidiary with its real estate. The real estate included in the scope of reorganization investment has been set idle since the bankruptcy proceedings were initiated. C Company opined that given the change of ownership of the real estate, land appreciation tax shall be suspended. Taxpayers with idle property and land after bankruptcy proceedings can apply for reductions and exemptions from property tax and urban land use tax. Due to the large amount involved, it filed an application for an advance tax ruling.

　　III. Ruling

　　Based on the information and statements provided by C Company, the tax authorities are of the view that the land appreciation tax on its real estate may be suspended due to the transfer and change of ownership of the real estate in the process of reorganization in accordance with the Announcement on the Continued Implementation of the Land Appreciation Tax Policies for Reorganization of Enterprises of the Ministry of Finance and the State Administration of Taxation (Announcement [2023] No. 51).

　　According to policies regarding property tax and urban land use tax, C Company can apply for reductions and exemptions from property tax and urban land use tax on its idle property and land after the people's court accepts its bankruptcy petition.

　　C Company is required to submit the ruling on acceptance of the bankruptcy petition and the written decision on appointment of the administrator issued by the people's court and the relevant materials on the reorganization to the tax authorities according to relevant policies and tax collection requirements.

　　IV. Basis for Ruling

　　1. Announcement of the Ministry of Finance and the State Administration of Taxation on the Continued Implementation of the Land Appreciation Tax Policies for Reorganization of Enterprises (Announcement [2023] No. 51);

　　2. Announcement of the Shanghai Municipal Finance Bureau and the Shanghai Municipal Tax Service of the State Taxation Administration on Matters Related to Reductions and Exemptions from Urban Land Use Tax (Hu Cai Fa [2022] No. 2);

　　3. Rules on Property Tax in Shanghai (Hu Fu Fa [1986] No. 129).

　　V. Date of Ruling

　　July 2024

　　The ruling is binding on the tax authorities in respect of the application filed by the applicant.