Liquidation of a legal entity
The liquidation of the legal entity is not considered the submission of participation shares of the participants.
If any legal entity is liquidated, if the asset of the legal entity is transferred to a participant who is a legal entity, and 100 percent of the participation in the legal entity is owned by the participant before the liquidation:
- the transfer of assets is not a taxable transfer of these assets by the liquidated legal entity;
- the value of the assets given to the participant is equal to the value for that legal entity before the assets were given;
- under the law, the distribution of assets is not considered a dividend;
- income and loss are not taken into account in the case of liquidation of participation in a liquidated legal entity;
- The balance value of fixed assets included in any category is transferred to the person who receives these assets.
This provisions it is applied only if the tax authority confirms that the main purpose of the cancellation is not tax evasion.
Creation of a legal entity
A transfer of assets is not considered a taxable transfer in the following cases:
- if the assets are transferred by a person or group of persons to any legal entity in lieu of an interest in the legal entity (with or without assuming any liability);
- if a person or a group of persons owns 100 percent of the shares in the legal entity after the exchange.
The value of the asset to the participant receiving the applicable asset is equal to its value at the time of delivery to the participant providing the asset. At this point, the asset's carrying value is transferred to the buyer.
The value of the participation received during the exchange is equal to the value of the assets given less the debt given.
If the liabilities assumed exceed the value of the assets given, this article shall not apply to that excess amount.
Reorganization of a legal entity
The value of shares and property belonging to the legal entity (legal entities) participating in the reorganization is equal to the value of these shares and property before the reorganization. The balance value of fixed assets belonging to the depreciation category is transferred to the person who receives these assets.
The transfer of participation shares and property between legal entities participating in the reorganization is not considered as a taxable alienation of property.
The exchange of participation shares of a resident legal entity that is a participant in the reorganization with participation shares in another resident legal entity that is a participant is not considered a taxable alienation of the participation share. In this case, the value of the exchanged shares is equal to the value of the original shares.
The distribution of shares of a legal entity that is a participant in the reorganization due to the change in the share of another legal entity is not considered a dividend for the participating parties. After distribution, the value of the first participation shares is divided between the first and distributed shares in proportion to their market value.
Cases of reorganization of a legal entity:
- merger of two or more resident legal entities;
- division of a resident legal entity into two or more resident legal entities;
- replacement of 50 % or more of the voting shares of a resident legal entity and the value of other participation shares of 50 % or more only with the participation shares of the party that is a participant in the reorganization;
- the acquisition of 50 % or more of the assets of a resident legal entity by another resident legal entity for the exchange of non-preferential shares with voting rights only in relation to the dividends of the party participating in the reorganization;
- creation of a new person by separation;
- means that a legal entity owning at least 50 % shares in the enterprise distributes all of its shares among the participants of the legal entity.
These provisions apply when the tax authority has confirmed that the primary purpose of the merger, consolidation, acquisition, separation or spin-off is not tax evasion.
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SEE ALSO: Rules for registration, re-registration and de-registration of a taxpayer
