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| Transfer pricing news from the Beijing State Tax Bureau |
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| Jun 2009 |
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The increasing anti-avoidance enforcement efforts of tax bureaus in China are prompting more and more enterprises to choose advance pricing arrangements ("APAs") to manage uncertainties with respect to their transfer pricing arrangements.
On 5 May 2009, the Economic & Technological Development Zone Office of the Beijing Municipal State Tax Bureau ("BSTB") signed its first unilateral APA after various rounds of negotiations facilitated by PricewaterhouseCoopers China's transfer pricing team. Mr. Kong Fanqi, the Executive Deputy Director of the BSTB, attended the APA signing ceremony.
The BSTB is responsible for transfer pricing and anti-avoidance enforcement in Beijing. According to a public announcement on its website, the BSTB will be continuously and cautiously responsive to current and future APA applications submitted by taxpayers. While on one hand, the BSTB will actively respond to taxpayers' APA applications, on the other hand the BSTB will carefully review APA applications specifically focusing on comparability analysis and industry analysis in respect of "major assumptions", "transfer pricing policy", "methodologies", etc.
As Beijing is the China headquarters location for many foreign-based multinational companies, the BSTB is anticipating an increasing number of APA applications and therefore has recently increased its number of anti-avoidance tax officials and is also in the process of forming a bilateral APA negotiation team. The BSTB currently has five bilateral APAs in negotiation. The BSTB expects that the recent conclusion of its first unilateral APA will have a positive impact on the application and conclusion of future APAs in Beijing.
We also note from our recent experiences during the annual income tax filing process that the local Beijing tax authorities seem to be facing pressure of tax collection and have started audit inquiries on certain taxpayers in a particular industry. Taxpayers should proactively assess their transfer pricing risks in order to prepare for potential transfer pricing enquiries from the tax authorities. |
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