China: Transfer pricing discussion draft; BEPS influence

China: Transfer pricing discussion draft

China’s State Administration of Taxation on 17 September 2015 released a discussion draft of proposed guidance relating to “special tax adjustments”—including those concerning transfer pricing—for public consultation. It is anticipated that this guidance could be finalized by the end of 2015, and once final, would replace the existing transfer pricing rules in China.


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The dicussion draft is composed of 16 chapters and 168 articles, and encompasses a range of source materials including: (1) existing transfer pricing guidance; and (2) items emerging from proposals in the OECD’s base erosion and profit shifting (BEPS) project. It also reflects the evolution of the transfer pricing enforcement approach of the Chinese tax authorities, and includes certain “novel” transfer pricing concepts that would be unique to China.

KPMG observation

The discussion draft would clarify the Chinese approach to transfer pricing investigations and analysis. Once final, new transfer pricing methodologies would be introduced, and transfer pricing documentation requirements would be significantly expanded. It has been observed that incidents of double taxation for certain multinational enterprises (MNEs) may increase under these rules, as proposed. As such, affected MNEs may need to consider adjusting their existing business models and transfer pricing policies.


Read a September 2015 report [PDF 1.21 MB] from the KPMG member firm in China: SAT solicits public comments on new China transfer pricing and special tax adjustments guidance discussion draft


The KPMG report focuses on changes that may have the most significant impact for MNEs under the following topics:

  • Changes to transfer pricing practices and approaches
  • Enhancements to transfer pricing documentation and transfer pricing administration
  • Special and general anti-avoidance rules

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