Transfer pricing is becoming an increasingly important topic for companies around the world, fueled among others by initiatives such as the BEPS (Base Erosion and Profit Shifting) Action Plan by the OECD as well as local guidelines, regulations and best practices.
China’s transfer pricing regime, albeit China not being a member of the OECD, is largely following recommendations by the OECD, where China has implemented via Bulletin 41 (2016) numerous rules and regulations on transfer pricing including requirements for transfer pricing documentation as set out in the BEPS Action Plan 13. All transactions between the headquarters of a multinational group (or other related parties) and its Chinese subsidiary should be conducted based on an arm’s length principle.
The Chinese transfer pricing regime consists out of two distinct aspects:
- Related party transactions:
All resident enterprises in China must file annual reporting forms for related party transactions, and these forms must be prepared and submitted together with the annual CIT filing. Furthermore, enterprises engaging in a cost sharing arrangement with related parties must complete the special file by June 30th of the next fiscal year.
- Detailed transfer pricing documentation:
Those enterprises who exceed relevant transaction thresholds are required to complete detailed transfer pricing documentation, including a) Master File and b) Local File.
Our Transfer Pricing Services
Through our association with the Moore Global Network, we leverage our international and local tax specialists to provide our clients complete transfer pricing solution, including planning, compliance and documentation support as well as advisory on tax efficiency and reducing non-compliance risks. In cooperation with our Moore partners globally, we are able to offer our clients a comprehensive transfer pricing service offering including:
- Support with the initial setup and updating transfer pricing documentation, including Local File and Master File.
- Benchmark studies.
- Transfer pricing policy design and implementation.
- Drafting and executing intercompany agreements.
- Advisory on Chinese foreign exchange regulation.
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