The State Administration of Taxation (SAT) on 28 March 2017 released guidance on special tax investigations, adjustments, and mutual agreement procedures (MAPs).
The guidance—Announcement 6—integrates some of the OECD's base erosion and profit shifting (BEPS) initiatives, particularly in relation to intangibles, into China’s domestic regulations. It also consolidates previous regulations on self-adjustments and outbound payments, and addresses certain existing practices adopted for transfer pricing audits.
Announcement 6 follows the release of China’s revised transfer pricing compliance regulations in June 2016, and is effective from 1 May 2017.
The announcement can be broadly divided into the following parts:
With the release of Announcement 6, taxpayers may be able to better understand the focus points and the rationale of tax authorities when undertaking transfer pricing investigations. More standardized transfer pricing investigation practices may be expected in the future.
Furthermore, given that Announcement 6 regulates both outbound payments and inbound receipts of royalty and service fees—while prior Chinese transfer pricing regulations focused mainly on outbound payments—it appears that first steps are being taken to administer the transfer pricing of outbound-investing Chinese multinationals.
Read a March 2017 report [PDF 412 KB] prepared by the KPMG member firm in China
<p>© 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.</p> <p>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.</p>
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.