中国转让定价实践的最新进展(EN)
摘自10月20日联合国国际税务合作专家委员会第二十一届会议资料
2.Part One: Recent Developments in China Transfer Pricing Practice
2.1.1The transfer pricing tax regime was first introduced in China in 1991. Over the past 3decades, the Chinese tax administration has been exploring ways to improve the transfer pricing administration and have made significant improvements over the last 10 years. Drawing from practical experience and international best practices, the Chinese tax administration was able to establish a well-rounded transfer pricing tax regime that includes legal framework, practical guidance, administrative process and operational mechanism. Dedicated transfer pricing teams were also trained and deployed at various levels of tax offices. With the view to stopping profit shifting and protecting China’s taxing right, the Chinese tax administration also recognizes that it is important to respect facts and data in any transfer pricing analysis.
2.1.2Transfer pricing administration has been put at the center of STA’s anti-avoidance work agenda in the recent years. Recognizing that preventative measures are as important as transfer pricing audits, the STA has built a three-pronged tax avoidance prevention and control system with consistent and standardized approach for administration, service and investigation. It is important that tax avoidance prevention should run parallel to transfer pricing investigations. Ways to prevent taxpayers from evading tax obligation include strengthened tax administration and improved taxpayer service. Investigations are only used as deterrence to foster taxpayer voluntary compliance. Moreover, different measures were taken to build a three-pronged tax avoidance prevention and control system. The first aspect of the three-pronged system is administration. A tracking system was put in place to monitor the profits of foreign MNEs operating in China. Chinese tax administration has put extra emphasis on routine review of related party filings and contemporaneous transfer pricing documentation. Follow-up monitoring subsequent to transfer pricing audits was implemented to encourage taxpayers to ensure their profitability is in line with the arm’s length principle. As to the second prong, service, seminars and trainings were provided to inform taxpayers of the latest tax regulations and policies. Double taxation was prevented (eliminated) through unilateral/bilateral APAs and resolution of MAP cases. With regard to the last aspect, investigation, both isolated and coordinated anti-avoidance audits were carried out to act as deterrence to regulate the profitability of individual companies or particular industries. Above all, the tax offices across the country have coordinated their actions to ensure that both domestic laws and international policies were followed in a consistent and standardized manner. As a result, inconsistency due to different work procedures was reduced to the minimal. The developments in China’s transfer pricing administration can be therefore summarized in the following 8 aspects.
2.2.Domestic Legislation and Practical Guidance
2.2.1.Legislation always comes first in transfer pricing. The Tax Collection and Administration Law and its Implementation Regulations and the Enterprise Income Tax Law and its Implementation Regulations and Individual Income Tax Law all contain clauses on transfer pricing. The first time that China introduced a comprehensive anti-avoidance regime into the legislation was through the “Special Tax Adjustment” provision in Chapter 6 of the Enterprise Income Tax Law and its Implementation Regulations in 2008. Not only did this chapter include provisions on transfer pricing and APA with which China had more experience but also clauses on cost sharing agreement, thin capitalization, control foreign companies, general anti-avoidance rule and the levy of interest as a result of transfer pricing adjustments for which China had to draw on international experience. In January 2009, the STA released the Implementation Measures of Special Tax Adjustments (Trial Version) (more commonly known as the “Circular 2”). It had since served as the practical guidance for China’s transfer pricing, and in broader scope, the anti- avoidance administration. and provided the legal basis for tax administration’s assessments and taxpayer compliance. In August 2018, transfer pricing rules, controlled foreign corporations rules, and general anti-avoidance rules were introduced into the newly revised Individual Income Tax law. Starting from 2016, STA has released a series of regulations to revise and update the Circular 2. Firstly, the Public Notice on Matters Regarding Refining the Filing of Related Party Transactions and Administration of Contemporaneous Transfer Pricing Documentation (Public Notice of the STA [2016] 42, hereafter referred to as the “Public Notice No. 42”) was put into effect in June 2016. As set out in the BEPS Action 13, Public Notice No. 42 has adopted clauses to require qualified taxpayers to file Country-by-Country reports in China. Public Notice on Matters Regarding Enhancing the Administration of Advance Pricing Arrangements (Public Notice of the State Administration of Taxation [2016] 64, hereafter referred to as “Public Notice No. 64”) was then released to provide more detailed guidance on the APA process. The release of Public Notice of the State Administration of Taxation on Issuing the“Administrative Measures of Special Tax Investigation and Adjustment and Mutual Agreement Procedure”(Public Notice of the State Administration of Taxation [2017] 6, hereafter referred to as the “Public Notice No. 6”) replaced the procedural guidance relating to transfer pricing as set out in the Circular 2.
2.3.Centralized Approval System to Assure Consistency and Standardization
2.3.1.There are more than 720,000 tax officials and 36 provincial level tax offices in China. It is paramount for a big country like China to be consistent and standardized in law enforcement especially when it comes to transfer pricing administration. An MNE might set up 30 subsidiaries across China. Without a consistent standard, tax administrations from different areas may find disparate comparable sets and derive various profit levels for transfer pricing cases of similar nature. To prevent this from happening, the STA has put in place a national anti-avoidance system under which tax administrations are to report and obtain approval from the STA headquarters when they need to initiate or close an anti-avoidance (including transfer pricing) case since 2015. The reporting chain put in place to standardize the audit procedures, improve the quality of closed cases, strengthen audit efforts, and organize national coordinated investigation . In 2012, the STA released the “Internal Approval Procedures for Substantial Special Tax Adjustment Cases (Trial Version) (Guoshuifa [2012]16) (hereafter referred to as the “Internal Approval Procedures”) to streamline procedures including related party filing review, contemporaneous transfer pricing documentation analysis, high-risk taxpayer identification, case initiation, audit and analysis, case closing, and follow-up taxpayer monitoring and tracking subsequent to an audit. As required by the “Internal Approval Procedures, a three-level transfer pricing audit system was established. The system features collective decision and penal approval. First, for every audit case, the in-charge tax administration needs to set up special task team to conduct the investigation. Second, the task team needs to formulate the preliminary assessment and report it to the tax administration at provincial level whose specialist panel is responsible for approving the case. In addition, for a case qualified as a substantial case especially a case that requires national coordination, the STA headquarters needs to call upon a nation-wide expert panel to make the final decision on the case. In September 2016, the STA has released the Internal Procedures for Special Tax Adjustment (Shuizongfa [2016]137), in which the roles and responsibilities of tax administrations at different levels and the collective review and approval system were further clarified. This system has enabled the tax administrations of different areas to work in a manner that would ensure the consistency in the selection of transfer pricing method and the determination of appropriate profit levels. A unified work standard across the country was formed accordingly. The consistency has made tax assessments more effective as deterrence measures. Tax officials are better protected from risks in enforcing the law thanks to the internal control system built according to the “Internal Procedures for Special Tax Adjustment”.
2.4.Monitor Profits of MNEs in China
2.4.1.Transfer pricing administration needs to move up the line of defense. Prevention can be very effective in fostering taxpayer voluntary compliance with the arm’s length principle and fulfilling tax obligation. Only when the taxpayers fail to be compliant the audits should be initiated. To better leverage the preventive effect, the STA has installed a monitoring system to track the profits of MNEs in China. The primary data sources are the annual corporate income tax returns and the accompanying related party filings. The information is compiled, compared and analyzed by year, industry, and geographical area. A monitoring system was designed to combine industry analysis with individual taxpayer screening. Tax administrations would receive alerts when the risks are identified. The history record and performance evaluation that the tax authorities have with a particular taxpayer can also be accessed in the system. In addition, by requiring taxpayers to prepare contemporaneous transfer pricing documentation and monitoring taxpayers in the follow- up years subsequent to the audits, taxpayers can better understand tax administrations’ approach to transfer pricing administration.
2.5.Intensify Audit Efforts
2.5.1.Audit efforts for nationally coordinated cases that involve several companies in a same industry or multiple subsidiaries of a same MNE group was intensified to improve the quality of closed cases. Investigations should be carried out in a consistent and standardized manner so that inconsistent assessment simply because tax administrations have different ways to go about cases that involve companies in the same industry or subsidiaries of a same group can be avoided. The transfer pricing audits can therefore be more effective as a tax avoidance deterrence measure. In the past years, China has initiated several nationally coordinated audits targeting industries including shoe manufacturing, computer manufacturing, high speed road construction, retail stores and hotels and fast-moving consumer goods. Apart from being subject to the nationally coordinated audits, automobile sector, luxury goods industry and pharmaceutical companies were also being analyzed at the industry level. The “income approach” was developed and applied to multiple cases to address the challenges posed by transfer of equity and intangibles between related parties. The Chinese tax administration has attached great importance to several key industry sectors and been paying attention to possible base erosion transactions including outbound payments and transfer of equity. In the meantime, the use and transfer of intangibles, intra-group services, and financial transactions have gradually come to the fore of Chinese tax administration’s work, which has contributed to the quantitative analysis of location specific advantage.The tax revenue contributed by the anti-avoidance work was RMB 679,000,000 in 2006 and RMB 64,634,000,000 in 2019. The number was more than 94 times higher with an annual increase rate of 41.97%. The revenue contribution from the administration measures was 56,872,000,000, whereas the revenue collected through the service measures was 2,719,000,000. And the rest was contributed by the audit adjustments.
2.6.APA Program and MAP Process
2.6.1.China has in place a MAP mechanism to eliminate double taxation resulted from transfer pricing audits and a bilateral APA program to provide early certainty for cross-border taxpayers. Unilateral APAs can also be reached between the Chinese tax administration and the taxpayers. By the end of 2019, China has signed 76 bilateral APAs and 113 MAP agreements with 15 countries. During the negotiations, where appropriate, concepts such as value chain analysis and factors contributing to value creation long held by the Chinese tax administration were discussed with and recognized by some treaty partners. In order to better inform the public of China’s APA program, the STA started to release “China APA Annual Report” in 2010. So far 10 reports have been published on the OECD official website and met with well reception from the international community.
2.7.Expand Data Sources for Comparability Analysis
2.7.1.Internal data extracted from corporate income tax returns and VAT refund database has played a primary role in identifying high-risk taxpayers. Meanwhile, external data obtained from National Bureau of Statistics, General Administration of Customs, State Administration of Foreign Exchange along with business information compiled in the National Database of Companies in Secondary Sector, Bureau van Dijk, Standard & Poor’s Net Advantage was also put to good use in comparability analysis.
2.8.Enhance International Communication and Cooperation
2.8.1.The STA has actively participated in meetings organized by the UN and the OECD. The STA has also presented China’s position on important issues including intangibles, transfer pricing documentation and comparability analysis and brought in concepts like exploitation of intangibles, quantification of location specific factors, value contribution by decision execution that were later incorporated into the updated OECD Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations (hereafter referred to as “OECD Transfer Pricing Guidelines”). By taking opportunities to talk to tax officials from other countries as well as representatives from MNEs, the STA was able to foster mutual understanding with them. On top of that, the STA has always been willing to share China’s experience in transfer pricing legislation and practice with other developing countries. Productive discussions on application of location savings and market premium in transfer pricing was generated in the process.
2.9.Build a Professional Transfer Pricing Team
2.9.1.Building a dedicated transfer pricing team has always been the priority of the STA. Trainings on anti-avoidance has been conducted in various forms such as discussions on domestic legislation, peer-to-peer case sharing, seminars delivered by experts from the OECD as well as from other countries, special training sessions on difficult topics such as transfer pricing involving intangibles, financial service sector, and pharmaceutical industry. The combination of in-class training and on- job learning has yielded good results as evidenced by significant improvement in tax officials’ professional capabilities. On the other hand, resources have been devoted to transfer pricing administration as well. Tax bureaus specialized in anti-avoidance work were set up in Beijing, Jiangsu province and Shenzhen. The purpose was to pool the local talents and let them focus on transfer pricing and other anti-avoidance work. In addition, in response to the increased workload related to transfer pricing audits and bilateral negotiation in the post-BEPS era, the STA has enhanced efforts in the training and development of talents for transfer pricing to ensure that sufficient resources and manpower is allocated to the work.
【特别提醒】大量中英文国际税收学习资料已经上传知识星球“国际税收学习圈”，欢迎同学们加入“国际税收学习圈”下载学习，学习费用每年400元，同学们加入后也可以匿名提问咨询各种国际税收的疑难问题。
联系我们：
深圳市思迈特财税咨询有限公司是一家以国际税务（转让定价）专业服务为主并兼顾一般高端税务（如企业重组、企业整体纳税规划等等）专业服务的专业财税咨询顾问服务机构。可通过以下方式联系我们：
谢维潮 高级合伙人（转让定价税务服务）
电话：0755-82810900
Email：xieweichao@cntransferpricing.com
李敦峰 合伙人 高级经理（转让定价与房地产税务服务）
电话：0755-82810900
Email：lidunfeng@cntransferpricing.com
