A: Hello! According to the sixth paragraph of Article 1 of the Notice of State Taxation Administration of The People's Republic of China of the Ministry of Finance on Several Issues Concerning the Treatment of Enterprise Income Tax in Enterprise Reorganization (Caishui [2009] No.59), separation means that an enterprise (hereinafter referred to as a separated enterprise) transfers part or all of its assets to an existing or newly established enterprise (hereinafter referred to as a separated enterprise), and the shareholders of the separated enterprise exchange for equity or non-equity payment of the separated enterprise to realize the legal separation of the enterprise. In addition, Article 4, paragraph 5, of the document stipulates that the reorganization of an enterprise shall be subject to the following provisions in addition to the special tax treatment provisions stipulated in this notice: when the enterprise is divided, the parties concerned shall deal with it according to the following provisions: 1. The separated enterprise shall recognize the gains or losses from asset transfer at fair value. 2. A separate enterprise shall confirm the tax basis of accepting assets at fair value. 3. When the separated enterprise continues to exist, the consideration obtained by its shareholders shall be treated as if it were distributed by the separated enterprise. 4. When the separated enterprise no longer exists, the separated enterprise and its shareholders shall be subject to income tax treatment according to liquidation. 5. The losses of enterprises related to enterprise division shall not be carried forward to make up for each other.