M&A of a company includes two meanings and two ways: merger and acquisition. It is customary to use M & amp； together internationally, collectively referred to as M&; A, this is called merger and acquisition in our country. That is to say, M&A between enterprises is an act of obtaining the property rights of other legal persons in a certain economic way on the basis of equality, voluntariness and equal compensation, and it is a main form of enterprise capital management. Merger and acquisition of companies mainly includes three forms: company merger, asset acquisition and equity acquisition.

The essence of M&A is a kind of right transfer behavior in the process of enterprise control right movement, which is made by all right subjects according to the institutional arrangement of enterprise property rights. M&A activities are carried out under certain conditions of property rights system and enterprise system. In the process of M&A, one or a part of the right holders get corresponding benefits by transferring the control right of the enterprise, while another part of the right holders get this control right at a certain cost. The process of enterprise merger and acquisition is essentially a process in which the subject of enterprise rights changes.

Corporate mergers and acquisitions can be divided into the following three categories from the perspective of industry:

1, horizontal merger. Horizontal mergers and acquisitions refer to mergers and acquisitions between enterprises belonging to the same industry or industry, or whose products are in the same market. Horizontal mergers and acquisitions can expand the production scale of similar products, reduce production costs, eliminate competition and increase market share.

2. Vertical mergers and acquisitions. Vertical M&A refers to the M&A behavior between enterprises closely related to the production process or business links. Vertical mergers and acquisitions can speed up the production process and save transportation and storage costs.

3. Mixed mergers and acquisitions. Mixed mergers and acquisitions refer to mergers and acquisitions between enterprises that produce and operate unrelated products or services.

2. What are the tax risks of M&A?

There are many motives for company mergers and acquisitions, which can be the pursuit of economies of scale, the realization of diversified operations, and the acquisition of advanced technology and management experience, but there is only one goal, that is, the pursuit of maximizing corporate profits. However, the tax problem directly affects the realization of enterprise profits. If the tax payment situation of the enterprise is not accurately examined before the merger, the merged enterprise will bear unnecessary risks. Therefore, in the process of enterprise merger and acquisition, how to prevent tax-related risks is a problem that all parties should pay attention to.

One of the risks is that

That is, the unfinished tax obligations of the target enterprise before the merger are inherited by the merged enterprise, which increases the tax burden of the merged enterprise.

At the time of merger, according to the provisions of Article 175 of China's Company Law, the creditor's rights and debts of the merging parties shall be inherited by the surviving company or the newly established company. Therefore, if the company before the merger has unpaid taxes, after the merger, due to the existence of inheritance relationship, the merged company will face the risk of assuming the tax obligations of the company before the merger.

The second risk

That is, the unfinished tax obligation of the target enterprise before the merger directly affects the financial situation of the enterprise after the merger.

If mergers and acquisitions are carried out in the form of asset acquisition or equity acquisition or holding merger under the same or different control, a series of tax problems will also arise. 1. After an enterprise obtains the control right of the target enterprise through asset acquisition, equity acquisition and holding merger, if the investing enterprise has the same control or significant influence on the invested entity according to the provisions of the Accounting Standards for Enterprises No.2-Long-term Equity Investment, the long-term equity investment shall be accounted by the equity method. Therefore, the change of profit and loss of the target enterprise may greatly affect the profit and loss of the enterprise after the merger. If the target enterprise fails to fulfill its due tax obligations before the merger, it will inevitably reduce the profit and loss of the enterprise after the merger. II. The consolidated enterprise group shall consolidate its financial statements in accordance with the Interim Provisions on Consolidated Accounting Statements and the Accounting Standards for Business Enterprises No.33-Consolidated Financial Statements. In this case, the unfinished tax obligation before the merger will even affect the financial situation of the whole enterprise group.

The third risk

That is, before the merger, the target enterprise should fulfill its tax obligation, which will inflate the net assets of the target enterprise and increase the merger cost of the merged enterprise.

If the target enterprise has overdue tax obligations, the tax obligations are actually debts to the state, but they are not reflected in the accounting statements before the merger. This directly leads to the inflated shareholders' rights and interests of the target enterprise, and the acquisition price of the acquired enterprise will be higher than its actual net assets, which increases the acquisition cost.

The fourth risk

That is to say, before the merger, the target enterprise should accrue tax-related matters, which will not only increase the merger cost of the merged enterprise, but also increase the tax burden of the merged enterprise.

If the target enterprise has accrued expenses, accrued depreciation, amortized assets, understated losses that can be made up in future years, and unexpired understated tax benefits, there will be two consequences in the process of enterprise merger and acquisition: first, the target enterprise has accrued expenses, accrued depreciation and amortized assets, which inflated the shareholders' rights and interests of the target enterprise and increased the merger and acquisition cost of the merged enterprise; Second, according to the Notice of the Ministry of Finance of People's Republic of China (PRC), State Taxation Administration of The People's Republic of China, on Several Issues Concerning Enterprise Income Tax Treatment of Enterprise Restructuring Business (Caishui [2009] No.59), if the enterprise merger chooses special tax treatment instead of income tax liquidation because it meets the requirements, the merged enterprise can make up the losses of the merged enterprise within the limit. The document also stipulates that in the process of absorption and merger, if the nature of the merged surviving enterprise and the applicable tax preferential conditions have not changed, they can continue to enjoy the tax preferential treatment for the remaining period of the enterprise before the merger. Therefore, if the target enterprise underestimates the losses that can be made up in the next year and underestimates the amount of tax incentives that have not yet expired, then the merged enterprise may enjoy less tax rights and interests inherited by the merged assets, which increases the tax burden of the merged enterprise from another angle.