Global

Details

  • Service: Tax, Global Transfer Pricing Services, International Tax
  • Type: Regulatory update
  • Date: 8/25/2014

China - Tax authorities focus on related-party service fees, royalties  

August 25:  China’s tax authorities are surveying taxpayers that made service fees and royalty payments to their foreign related parties during years 2004-2013. As a result of these surveys, transfer pricing audits may potentially be triggered with respect to these related-party transactions.

The State Administration of Taxation instructed tax bureaus across China to survey and report back to it in September 2014 regarding companies within their jurisdictions that made service fees or royalty payments to related parties between 2004 and 2013. These years are eligible for potential tax adjustments because the statute of limitations for transfer pricing in China is 10 years.

KPMG observation

Taxpayers having paid or currently paying service fees and/or royalties with respect to transactions with foreign related parties need to consider carefully the economic substance of such royalty payments and the beneficial nature of the service fees.


Immediate action may be needed in order for affected taxpayers to determine that there is adequate evidence to support and justify the service fees and royalty payments made to (being made to) foreign related parties.


Read an August 2014 report [PDF 987 KB] prepared by the KPMG member firm in China: The SAT’s formal assessment on services fees and royalty payments



Contact a tax professional with KPMG's Global Transfer Pricing Services.




©2014 KPMG LLP, a Delaware limited liability partnership and the U.S. member firm of the KPMG network of independent member firms affiliated with KPMG International Cooperative ("KPMG International"), a Swiss entity. All rights reserved.


The KPMG logo and name are trademarks of KPMG International.


KPMG International is a Swiss cooperative that serves as a coordinating entity for a network of independent member firms. KPMG International provides no audit or other client services. Such services are provided solely by member firms in their respective geographic areas. KPMG International and its member firms are legally distinct and separate entities. They are not and nothing contained herein shall be construed to place these entities in the relationship of parents, subsidiaries, agents, partners, or joint venturers. No member firm has any authority (actual, apparent, implied or otherwise) to obligate or bind KPMG International or any member firm in any manner whatsoever.


The information contained in herein is of a general nature and is not intended to address the circumstances of any particular individual or entity. Although we endeavor to provide accurate and timely information, there can be no guarantee that such information is accurate as of the date it is received or that it will continue to be accurate in the future. No one should act on such information without appropriate professional advice after a thorough examination of the particular situation.


Direct comments, including requests for subscriptions, to us-kpmgwnt@kpmg.com.
For more information, contact KPMG's Federal Tax Legislative and Regulatory Services Group at:

+ 1 202 533 4366

1801 K Street NW
Washington, DC 20006.

 

Share this

Share this

Subscribe

Subscribe to receive the latest TaxNewsFlash email alerts (you must select the option for TaxNewsFlash)


Already a Subscriber? Login


Not a member? Subscribe now