China Lets Chip and Machine Tool Firms Spread Asset-Swap Tax Over Five Years

The Ministry of Finance, the State Taxation Administration, the National Development and Reform Commission and the Ministry of Industry and Information Technology have jointly issued an announcement on corporate income tax policy for non-monetary asset exchanges by integrated circuit enterprises and machine tool enterprises. The announcement clarifies that for non-monetary asset exchanges occurring between January 1, 2026 and December 31, 2028, the income recognized from such exchanges may be evenly included in the taxable income for the corresponding years over a period not exceeding five years, and corporate income tax shall be computed and paid in accordance with current policy provisions.

According to the announcement, losses incurred from non-monetary asset exchanges shall not be recognized on a deferred basis. Other enterprises that conduct non-monetary asset exchanges with integrated circuit enterprises or machine tool enterprises should recognize the income from such exchanges in accordance with current policy provisions and pay income tax in accordance with the law. If both parties to a non-monetary asset exchange are integrated circuit enterprises or machine tool enterprises, both parties may enjoy the preferential tax policy specified in this announcement.