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11. BUSINESS TRANSFORMATION AND RE-ORGANIZATION

The tax code provides for a favorable regime for mergers and similar restructuring operations. The regime is optional for companies but its application does require the prior approval of the tax administration. Pursuant to the regime, a roll-over relief is available for capital gains on transferred assets as well as for booked reserves and provisions that are no longer justified due to the restructuring operation. Such items must be added back to taxable income in instalments over a period of 5 years. In case assets are disposed of within 5 years from the date of the restructuring operation, the capital gain on the asset is calculated by reference to its book value in the books of the absorbed company.