China: Tax planning for sales and purchase agreements | KPMG | GLOBAL
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China: Tax planning, negotiations for sales and purchase agreements

China: Tax planning for sales and purchase agreements

Despite potential historical tax non-compliance of mergers and acquisition (M&A) targets being a key issue when doing deals in China, the appetite for transactions (whether equity or asset deals) has not let up. Consequently, as deal structures in China have also become more complex, the need for sophisticated tax-related clauses within respective sales and purchase agreements has become more critical than ever.


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In a tax context, the sales and purchase agreement ideally would: (1) provide protective mechanisms for both the buyer and seller on historical tax issues; and (2) clarify on the rights and obligations of both the buyer and seller regarding settlement of the relevant tax-related matters prior to or post-closing of the transaction.

In recent years, the most common tax-related disputes between buyers and sellers in the market have typically concerned items that were simply overlooked or not clearly stipulated. To address this situation, certain key tax-related issues to be considered when drafting and negotiating a sales and purchase agreement are:

  • Tax remediation-related clauses
  • Transfer-related taxes
  • Escrow arrangements
  • Earn-out arrangements
  • Conduct clauses


Read a September 2017 report [PDF 240 KB] prepared by the KPMG member firm in China

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