The State Administration of Taxation (SAT) today published an announcement reflecting enhanced administration of advance pricing arrangements (APAs).
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:
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
© 2018 KPMG International Cooperative (“KPMG International”), a Swiss entity. Member firms of the KPMG network of independent firms are affiliated with KPMG International. KPMG International provides no client services. No member firm has any authority to obligate or bind KPMG International or any other member firm vis-à-vis third parties, nor does KPMG International have any such authority to obligate or bind any member firm. 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. 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.