Four Departments Issue Document! Concerning Corporate Income Tax Policies for Non-Monetary Asset Exchanges of Integrated Circuit Enterprises and Industrial Mother Machine Enterprises

On August 14, the Ministry of Finance, State Taxation Administration, National Development and Reform Commission, and Ministry of Industry and Information Technology issued an announcement regarding the enterprise income tax policy for non-monetary asset exchanges by integrated circuit enterprises and industrial mother machine enterprises. This policy will be implemented from January 1, 2026, to December 31, 2028. The announcement states that during the period from January 1, 2026, to December 31, 2028, integrated circuit enterprises and industrial mother machine enterprises that engage in non-monetary asset exchanges may recognize the non-monetary asset exchange income as stipulated and allocate it evenly over a period not exceeding five years to the corresponding annual taxable income, with corporate income tax calculated and paid according to existing policy provisions. Losses incurred from non-monetary asset exchanges are not to be recognized on an installment basis. The original text is as follows: Announcement on the Enterprise Income Tax Policy for Non-Monetary Asset Exchanges by Integrated Circuit Enterprises and Industrial Mother Machine Enterprises Announcement No. 23 of 2026 from the Ministry of Finance, State Taxation Administration, National Development and Reform Commission, and Ministry of Industry and Information Technology Hereby, the following announcement is made regarding the enterprise income tax policy for non-monetary asset exchanges by integrated circuit enterprises and industrial mother machine enterprises: I. Integrated circuit enterprises and industrial mother machine enterprises that engage in non-monetary asset exchanges from January 1, 2026, to December 31, 2028, may recognize the non-monetary asset exchange income as specified and include it evenly in the taxable income for the corresponding years over a period not exceeding five years, with corporate income tax calculated and paid as per existing policy provisions; losses incurred from non-monetary asset exchanges cannot be recognized on an installment basis. II. Enterprises engaging in non-monetary asset exchanges with integrated circuit enterprises and industrial mother machine enterprises shall recognize the non-monetary asset exchange income in accordance with existing policy provisions and pay taxes in accordance with the law. If both parties to the non-monetary asset exchange are integrated circuit enterprises or industrial mother machine enterprises, both parties may enjoy the tax incentives stipulated in this announcement. III. Both parties to the non-monetary asset exchange shall calculate and recognize the non-monetary asset exchange income based on the fair value of the corresponding incoming non-monetary assets, less the tax basis of the corresponding outgoing non-monetary assets and related taxes and fees. IV. The non-monetary assets obtained by both parties from the non-monetary asset exchange shall have their tax basis determined by the fair value of such assets plus the related taxes and fees paid. V. The term "non-monetary assets" as referred to in this announcement means assets other than monetary assets such as cash, deposits, receivables, notes receivable, and bonds intended to be held until maturity. The term "non-monetary asset exchange" means the exchange of non-monetary assets for other non-monetary assets. In a transaction involving both non-monetary assets and monetary assets, the portion involving the exchange of non-monetary assets for non-monetary assets may enjoy the installment tax policy as stipulated in this announcement; the portion involving the exchange of non-monetary assets for monetary assets, which pertains to transactions involving monetary consideration, shall recognize the corresponding income or loss as per existing regulations and will not be eligible for the installment tax policy. If both parties are involved with monetary assets, the exchange of monetary assets should reflect the difference in monetary assets. VI. If integrated circuit enterprises or industrial mother machine enterprises transfer the acquired assets within five years of a non-monetary asset exchange, they must cease to implement the installment tax policy, and any unrecognized non-monetary asset exchange income from the installment tax period must be calculated and paid as corporate income tax in a lump sum during the annual corporate income tax settlement in the year the asset is transferred. If integrated circuit enterprises or industrial mother machine enterprises are deregistered within five years of a non-monetary asset exchange, they must cease to implement the installment tax policy, and any unrecognized non-monetary asset exchange income from the installment tax period must be calculated and paid as corporate income tax in a lump sum during the annual corporate income tax settlement in the year of deregistration. VII. The term "integrated circuit enterprises" and "industrial mother machine enterprises" as mentioned in this announcement refers to enterprises that meet the criteria stipulated in the "Announcement of the Ministry of Finance, State Taxation Administration, National Development and Reform Commission, and Ministry of Industry and Information Technology regarding Increasing the Deduction Ratio of Research and Development Expenses for Integrated Circuit and Industrial Mother Machine Enterprises" (Announcement No. 44 of 2023, hereinafter referred to as Announcement No. 44). Updates should be followed as per the stipulations. Integrated circuit enterprises and industrial mother machine enterprises that adopt inventory management as per Announcement No. 44 must provide the Ministry of Finance and the State Taxation Administration with a list of eligible enterprises for the previous year by the end of March each year; for those not adopting inventory management, tax authorities may refer to the development reform and industry and information technology departments for verification as stipulated. VIII. For enterprise income tax related to non-monetary asset investments, it shall continue to be implemented as per the "Notice of the Ministry of Finance and the State Taxation Administration on the Enterprise Income Tax Policy Issues Concerning Non-Monetary Asset Investments" (Cai Shui [2014] No. 116) and the "Notice of the Ministry of Finance and the State Taxation Administration on Improving Tax Policies Related to Stock Incentives and Technology Equity" (Cai Shui [2016] No. 101). IX. Enterprises that engage in non-monetary asset exchanges and meet the relevant tax policy conditions stipulated in the "Notice of the Ministry of Finance and the State Taxation Administration on Several Issues concerning the Enterprise Income Tax Treatment of Enterprise Restructuring" (Cai Shui [2009] No. 59) and the "Notice of the Ministry of Finance and the State Taxation Administration on Promoting Enterprise Restructuring Related Enterprise Income Tax Treatment" (Cai Shui [2014] No. 109) may choose to execute one of the policy provisions, and once chosen, it cannot be changed. X. This announcement will be implemented from January 1, 2026, to December 31, 2028. If an enterprise benefits from the installment tax policy stipulated in this announcement for less than five years before December 31, 2028, it may continue to enjoy the policy until the five-year period ends. This is hereby announced. This article is compiled from the official website of the "Ministry of Finance," edited by Jiang Yuanhua.