China Tax/Business News Flash

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Jul 2015, Issue 33

Intra-group outbound payments - local-level tax authorities taking actions

We have reported several times in the last two years on the official views and position of the State Administration of Taxation (SAT) regarding outbound payments to overseas related parties as well as Public Notice 16 which puts the SAT’s views and position into action. Following Public Notice 16, we have observed inconsistent practices in interpreting and enforcing Public Notice 16 among different local-level tax authorities which results in potential transfer pricing issues and risks for multinational corporations (MNCs). Recently, the State Tax Bureau of Zhejiang Province (Zhejiang STB), the first tax bureau at the provincial level, released the (the “Guideline”), providing a supplementary interpretation on the major tax risks stemming from outbound payments to overseas related parties and putting forward relevant suggestions on risks control as well as measures to tackle these risks. It is expected that tax authorities at the local levels in various regions will take actions accordingly and bolster their efforts to monitor and scrutinize the outbound payments to overseas related parties.

In this News Flash, we will share our observations on the Guideline and the local practices of local-level tax authorities in other regions on the outbound payments to overseas related parties, and put forward feasible recommendations to MNCs, in order to optimise their intra-group charge structure and reduce relevant tax exposure.

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