BUSINESS TAX ON COLLATERALS SOLD IN COURT-ORDERED SALE BY OR ASSIGNED TO ASSET MANAGEMENT COMPANY

01/01/2011

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The business tax leviable on an asset management company ("AMC") for collecting its non-performing loans ("NPLs") through the court compulsory enforcement procedure is as follows:
l	Collecting NPLs through Court-Ordered Sale
	If an AMC collects NPLs through a court-ordered sale, the portion the AMC actually receives out of the proceeds obtained by the court after the sale of the collateral should be considered payment for the NPLs, which less the cost of the NPLs is subject to 2% business tax after deducting the cost of the NPLs.
l	Taking Assignment of Collateral by Settling NPLs in Full First and Reselling Collateral
	Disposal of NPLs and resale of the collateral are different transactions and should each be subject to business tax. Regarding the business tax on the disposal of NPLs, the auction price of the collateral less the original cost of the NPLs is subject to 2% business tax. As for the resale of the collateral, the actual price is the sales revenue subject to business tax. If the AMC is a GBRT (gross business receipt tax) operator, and the collateral is classified as a fixed asset rather than an inventory for purposes of regular buy-sale transactions, such resale is exempt from business tax.