China's Ministry of Finance and three co-regulatory authorities announced on 31 July 2026 a five-year corporate income tax deferral for non-monetary asset exchanges by integrated circuit and industrial machine tool enterprises through 2028.
China’s Ministry of Finance, State Taxation Administration, National Development and Reform Commission, and Ministry of Industry and Information Technology issued Announcement No. 23 of 2026 on 31 July 2026, establishing a temporary corporate income tax relief for non-monetary asset exchanges by integrated circuit enterprises and industrial machine tool enterprises.
Five-year deferral on exchange income
The four authorities allow qualifying enterprises to spread taxable income from non-monetary asset exchanges over as many as five years, rather than recognising the full amount immediately. The policy applies to exchanges occurring between 1 January 2026 and 31 December 2028. Enterprises must calculate income by deducting the tax basis of the asset given up, plus any related taxes and fees, from the fair value of the asset received.
The deferral applies only to gains. Losses incurred in non-monetary asset exchanges remain subject to standard recognition rules and cannot be spread over time.
Treatment of mixed transactions and asset transfers
When a single transaction involves both non-monetary and monetary assets, the authorities direct enterprises to apply the deferral only to the non-monetary portion. Income from monetary consideration follows standard immediate recognition rules. Assets acquired through non-monetary exchanges carry a tax base equal to their fair value plus related taxes and fees paid.
An enterprise that transfers or liquidates assets acquired through a qualifying exchange within the five-year period must accelerate recognition of all remaining deferred income in the year of transfer or deregistration. Similarly, if an enterprise is deregistered before five years elapses, any unrecognised deferred income becomes due immediately in the deregistration tax settlement.
Eligibility and framework
Eligibility follows the criteria set by Announcement No. 44 of 2023, which governs the additional R&D expense deduction for these sectors. The National Development and Reform Commission and Ministry of Industry and Information Technology provide qualifying enterprise lists to the finance and taxation authorities each year by 31 March.
Enterprises already meeting the conditions for non-monetary asset investment or enterprise restructuring relief under prior guidance (notices Cai Shui [2014] No. 116, Cai Shui [2016] No. 101, Cai Shui [2009] No. 59, and Cai Shui [2014] No. 109) may elect one policy framework per transaction; this election becomes irreversible once made.
The authorities note that enterprises enjoying less than five years of deferral by 31 December 2028 may continue the instalment arrangement until the five-year period concludes.
