China Tax Alert: Transfer Pricing Focus - Issue 2, June 2013
The State Administration of Taxation (SAT) released the Chinese-English bilingual China Advanced Pricing Arrangement Annual Report (2011) (the 2011 Annual Report) on 26 December 2012. Notwithstanding the fact that the SAT has issued three annual APA reports, in which it has published annual statistical data and detailed procedures for application and negotiation, there is still a considerable amount of uncertainty and misunderstanding about APA application and negotiation among taxpayers. Over the past six months, KPMG China has assisted enterprises to sign approximately four APAs. Based on the information provided in the 2011 Annual Report and experience from recent cases, we share our observations on the development trend of the China APA program, and explore the possibility of leveraging APA to manage transfer pricing (TP) risk for taxpayers.