China

China Advance Pricing Arrangement Annual Report 

The SAT recently issued its fourth annual APA Report, which includes an introduction to China's APA program, the implementation procedures and related forms, and the recent development of the APA practice in China, together with a statistical survey of China's APA program for the period from 1 January 2005 to 31 December 2012. The document titled China Advanced Pricing Arrangement Annual Report, published in December 2012. An APA refers to an arrangement whereby an enterprise applies in advance to negotiate and reach agreement with the tax authorities in respect of the transfer pricing methods and corresponding calculation methods to be applied to its related party transactions for future years in accordance with the arm’s length principle. An APA may be categorised as unilateral, bilateral or multilateral based on the number of competent authorities involved in the APA.


China's tax authorities signed 85 APAs during the eight year period between 1 January 2005 and 31 December 2012. 56 agreements were unilateral APAs and the remaining 29 agreements were bilateral APAs. In 2012, the number of bilateral APAs signed was nine, exceeding the three unilateral APAs signed in the same year.

 

The 2012 APA Report newly disclosed the team structure of SAT officers involved in APA.  According to the report, the number of persons on staff at the SAT Headquarters increased to 8 (who are also charged with TP-related MAP cases) in 2012. The staff are organised into different teams according to their own professional qualifications and expertise and how these qualities fit in with the requirements of bilateral negotiations. Currently the SAT has three teams responsible for Japan and South Korea, the rest of Asia Pacific (the US, Canada, Australia, Singapore, HK SAR), and the European countries (the UK, Germany, the Netherlands, Italy, Belgium, Luxemburg, Denmark, Sweden, Switzerland) respectively. 

 

By issuing a periodical disclosure of the developments of its APA program, the SAT hopes to achieve strengthened cooperation with the taxpayers, as well as a higher degree of transparency for the regulations within the PRC and guidelines for their application. It underscores the SAT’s interest in further developing and enhancing its APA program.