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11. BUSINESS TRANSFORMATION AND RE-ORGANIZATION

There is no capital gains tax on sale, exchange or transfer of business assets (except business assets liable to be depreciated under pooling system) of companies in business re-organization. The value of business assets held by the merging company is considered same for the merged company resulting after re-organization. Re-organization means:

  • Merger of two or more resident companies;
  • Acquisition of 50% or more of shares or voting rights, by number or value, in a resident company in exchange for voting participation with no preferential dividends of party to the re-organization;
  • Acquisition of 50% or more of assets of a resident company by another resident company solely in exchange for voting participation with no preferential dividends of party to the re-organization;
  • Splitting of a resident company into two or more resident companies
  • A spin off

Losses of company under re-organization is not allowed to be carried forward to resultant company.

In case of change in ownership (direct or indirect) of share capital or voting rights of a company by more than 25% (in value or number), then carry forward of losses is not allowed pertaining to the relevant tax year and previous tax years.