Advance Pricing Agreement China

For taxpayers, it may be useful to consider the categories of companies that could apply for an APA to manage their transfer pricing risks: the report also shows that a unilateral APA usually takes two years, while a bilateral agreement can take more than three years. It should be noted that this period relates to the formal application date up to the closing date – given the preparation and communication with local tax authorities prior to the presentation, this means that the actual cost of time for applicants is much higher. According to the 2015 report, the SAT concluded between 2005 and 2015 a total of 125 APA (76 unilateral and 49 bilateral agreements), which signed an average of 10 to 13 unilateral and bilateral APAs per year. Chart 1 shows a very limited increase in the number of APAs concluded each year over the decade. The SAT offers national and local tax officials significant transfer (TP) and training prices to the APA and in 2015 established a third department to combat tax evasion. These measures will help increase the number of APA applications processed by the SAT in the future, but this gap is unlikely to be filled in the foreseeable future. Market Notice 6 reflects the relentless concentration of tax authorities on services provided to related businesses and transactions related to intangible assets. In general, companies that have entered into large and complex agreements on these types of transactions are generally considered to face increased transfer pricing risks. By proactively requesting APAs, these companies have the opportunity to explain in detail to tax authorities the business environment, transaction structure and pricing policy of these transactions, in order to effectively manage the transfer pricing risks associated with them. Statistics analyze advance pricing agreements signed based on year, type of transaction, region, industry, time spent and method of transfer pricing applied.

On October 29, the Chinese tax administration published the 2019 annual report on the pre-price system, which contains statistics on price preferences signed between taxpayers and the Chinese tax administration between 2005 and 2019. Looking ahead, uncertainty in the global economy due to the disruptions caused by the coronavirus pandemic (COVID-19) and the challenges of some trade policies is seen as an increasing incentive for tax revenues from governments around the world. With such uncertainties, taxpayers are looking for an environment that provides fair and specific tax administration to facilitate cross-border investment. In this regard, the Chinese tax authorities are seen as continuing their efforts to improve the business environment and promote free trade and investment in China, as evidenced by efforts to consistently advance the APP program to ensure the safety of taxpayers and to avoid and avoid double taxation.

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