As you are likely aware, the State Administration of Taxation ("SAT") has recently issued Administrative Regulations for Special Tax Adjustments ("STA Rules") as set out in notice, Guo Shui Fa [2009] No. 2, dated 8 January 2009. The STA Rules have standardized the administrative procedures for preparation of transfer pricing ("TP") contemporaneous documentation, disclosure and compliance of inter-company transactions, advance pricing agreements ("APAs") and cost sharing agreements ("CSAs"). The STA Rules represent the most important piece of legislation in the transfer pricing field in China for both foreign and domestic enterprises. Taxpayers will refer to these rules to determine what their transfer pricing compliance should be for 2008 and onward.
The STA Rules were announced in the context of SAT's commitments, among other things, to further enhance in its administration on cross-border transactions. Meanwhile, the promulgation of the STA Rules lays a good foundation for the respective tax administration of large and small-sized enterprises, particularly for the special tax administration of large-sized enterprises.
According to the requirements of new enterprise income tax law, companies with annual related party transactions (purchase/sale of goods) over RMB 200 million or annual amount of other related party transactions (including services, interest, royalties, etc.) over RMB 40 million are required to prepare contemporaneous TP documentation. Fiscal year 2008 will be the first year that TP documentation is required in the People's Republic of China. The preparation deadline of 2008 contemporaneous documentation report may be postponed to December 31, 2009.
In conjunction with Guo Shui Fa [2008] No.114 released on 5 December 2008 regarding the Annual Reporting Forms for Related Party Transactions of Enterprises of the People's Republic of China, it is indicated that China's tax administration of related party transactions among associated enterprises are in line with international practice and the tax administration's requirements are raised to a higher level of standards.
In light of the release of the new rules and the strengthening of TP enforcement in China, it is imperative that taxpayers not only pay attention to the status of their current related-party transactions in China, but also proactively review their transfer pricing policy and study the impact of the new rules on their business operations in China. In the meantime, taxpayers should prepare contemporaneous transfer pricing documentation as required so as to minimize its transfer pricing risks in China. It is advised that taxpayers:
Pay attention to and understand China's transfer pricing regulations; Review the internal transfer pricing policy; Complete annual reporting forms for related party transactions and prepare comprehensive materials for contemporaneous documentation purpose; Timely submit required documents and materials; Participant in professional training of the STA Rules and seek other professional advice in a proactive manner.
Documents to be downloaded: (under the courtesy of Deloitte)
- Tax_newsletter summarizing the rules and technical analysis
- New transfer pricing requirements in China : Frequently Asked Questions
- STA rules in billingual: unofficial English translation
We are pleased to invited experts from Deloitte to give us a further explanation on this newly release regulation on Feb.11th, 2009.
Speaker:
Brett A. Norwood, Ph.D.-Transfer Pricing Economist, click here to view speaker's CV.
Frank Tang - Tax Partner, click here to view speaker's CV.
Rose Qin - Tax Senior Manager, click here to view speaker's CV.
Topics will be covered:
Annual Reporting of Related Party Transactions and Contemporaneous TP Documentation Requirement TP Audits and Adjustments Advance Pricing Arrangements (“APAs”) Cost Sharing Agreements (“CSAs”) Approaches to Documentation Other Related Topics
Agenda:
13:30 - 14:00 Registration & Payment
14:00 - 14:10 Brief introduction of the speaker
14:10 - 15:10 Presentation
15:10 - 15:30 Coffee break
15:30 - 16:30 Roundtable discussion and practical exchange
16:30 - 17:00 Networking
Terms & Conditions:
To confirm your attendance please kindly contact Kitty Wang at tianjin@euccc.com.cn or by phone on 022 2374 1122 before the close of business on 9th February, 2009.
If after registering you are unable to attend, please cancel your participation by phone or email 24hours in advance, otherwise the full rate will be charge. This will help the smooth running of the event. Thanks for your kind understanding.