China country by country reporting guidance | KPMG | BE

China: Guidance clarifying country-by-country reporting, information exchange

Country-by-country reporting in China

China’s tax authority in 2016 issued guidance concerning the administration of related-party declarations and contemporaneous documentation, and recently issued an announcement clarifying that certain provisions of country-by-country (CbC) reporting will not apply for the CbC report for 2016.

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The 2016 guidance is known as Announcement 42, and the 2017 guidance is known as Announcement 46. 

The exchange of information measures were included as part of the CbC reporting measures in China pursuant to Announcement 42. In particular, the tax authorities may implement information exchange for CbC reporting pursuant to a treaty, agreement or arrangement between China and a foreign counter-party. Also, the tax authorities may, at the time of implementation of a “special tax investigation,” require the taxpayer entity to provide a CbC report when the tax authorities are unable to obtain the CbC report through an information exchange mechanism.

China’s State Administration of Taxation (SAT), International Taxation Department, made the following interpretations with regard to measures included in Announcement 46:

  • For the ultimate holding company of a multinational enterprise (MNE) that is a Chinese resident enterprise, the company must prepare and submit the CbC report to the relevant tax authorities if the requirements set forth in Announcement 42 are satisfied (including the annual consolidated revenue of the group in the previous fiscal year exceeds CNY 5.5 billion). In this situation, according to the requirements of Announcement 46, the tax authorities in China will not implement the information exchange measures on the 2016 CbC report.
  • For foreign-invested enterprises in China, if the MNE group to which it belongs to is required to prepare a CbC report pursuant to relevant provisions of its respective country, Announcement 46 states that tax authorities in China may not, at the time of implementation of special tax investigation, require the Chinese company to provide the group CbC report. However, if the company meets the threshold requirement to prepare transfer pricing contemporaneous documentation under the Announcement 42, transfer pricing contemporaneous documentation must then be prepared and submitted when required by tax authorities during a special tax investigation.

 

Read a December 2017 report prepared by the KPMG member firm in China

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