China

China Advance Pricing Arrangement Annual Report 

The SAT recently issued its fifth 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 2013. The document titled China Advanced Pricing Arrangement Annual Report, published in December 2013. 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 categorized as unilateral, bilateral or multilateral based on the number of competent authorities involved in the APA.


China's tax authorities signed 104 APAs during the eight year period between 1 January 2005 and 31 December 2013. 67 agreements were unilateral APAs and the remaining 37 agreements were bilateral APAs. In 2013, the number of bilateral APAs signed was eight, exceeding the eleven unilateral APAs signed in the same year.


The 2013 APA Report disclosed the team structure of SAT officers involved in APA.  According to the report, the APA program has a total of six staff members in 2013 at the SAT Headquarters level (who are also charged with TP-related MAP cases). The staffs are organized 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, Australia and other Asia-Pacific countries and regions), and the European 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.

 

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