China: New APA administrative guidelines, effective December 2016

China: New APA administrative guidelines

The State Administration of Taxation (SAT) today published an announcement reflecting enhanced administration of advance pricing arrangements (APAs).

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The new guidance (Announcement 64) replaces the current rules on APA administration, issued in 2009, and will be effective beginning 1 December 2016. Announcement 64 will apply to APA applications that have not yet been formally accepted by the tax authority before the announcement’s implementation.

The APA rules—including those for unilateral, bilateral, and multilateral APAs—refer to an arrangement whereby an enterprise applies in advance to negotiate and reach an agreement with the tax authority 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. Under the existing (2009) guidance, the APA process consists of six stages—pre-filing meetings, formal application, examination and appraisal, negotiation, signing of arrangement, and supervision of implementation. The new guidance (Announcement 64) follows this classification; however, some detailed contents in each stage have been revised with respect to:

  • Pre-filing meeting
  • Intention
  • Analysis and appraisal
  • Formal application
  • Negotiation and signing
  • Supervision of implementation

KPMG observation

Tax professionals note that under the new APA guidelines, more preparation work will need to be completed prior to the formal application stage, and thus, implies that with the implementation of a higher threshold, more efficient and rigorous work would be a precondition to success in the APA application process. 

 

Read an October 2016 report [PDF 246 KB] prepared by the KPMG member firm in China

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