China alert: Transfer Pricing Focus - Issue 2, March 2012
Based on our recent communication with the tax authority and the tax investigation cases involved, the tax authority made clear its intention to scrutinise indirect disposal by non-resident enterprises. In particular, the tax authority pays extra attention to two aspects: whether the 'look through' principle applies when a non-resident enterprise transfers the equity of a Chinese resident enterprise indirectly; and whether the price of the equity transfer between related parties is in line with arm's length principle.