Transfer Pricing Services

TP contemporaneous documentation (“TPD”) preparation and update

During the recent years, Chinese tax authorities have significantly enhanced their controls on related party transactions and TP investigation. Many companies are required by their in-charge tax authorities to submit TPD within and very short period of time, and are thus put into very disadvantageous positions. Further, the companies that have not been investigated by the tax authorities should also pay attention to their potential risks in the related party transaction and TP areas, and make appropriate arrangements. For example:
  • A company purchase goods from, or sell goods to related parties: is such price in line with the third party independent pricing principle? If not, are there justifiable commercial reasons to explain the difference?
  • A company remits royalty or service fee to overseas parent or affiliate: it may consider that the work is done after withholding the applicable taxes and completing the remittance. But actually the tax authorities may further scrutinize the reasonableness of the amount remitted, and require the company to provide further supporting documents to justify from the TP perspective. Otherwise, the tax authorities may deny the CIT deduction or even take more severe actions.
  • Under an internal restructuring process, a company’s shares are transferred to another group company: can such share transfer price be based on the book value of the net assets? If not allowed, then how to prove the price is the fair market price?
  • Various companies within a group have situations like fund allocation (borrowing and lending activities in substance), people sharing (service provision in substance) or sharing office/plants (leasing in substance): strictly speaking, such related party transactions should be priced according to the TP regulations and subject to the relevant taxes, like CIT, BT, VAT, etc.

We use the same TP database as the tax authorities and the Big 4 Accounting Firms, have extensive technical and practical experience, and can provide various types of TP-related professional services to our clients according to their specific needs, such as:

  • We have helped many clients to prepare their TPD for the past several years and reply to the questions raised by their in-charge tax authorities.
  • We have also helped many clients to update their TPD (which was initially prepared by the Big Four International Accounting Firms) on an annual basis.
  • We can also help our clients to handle the TP challenges or investigation requests raised by their in-charge tax authorities.

Benchmarking analysis and TP risk assessment

In addition to the annual TPD requirement, tax authorities may also require a company to justify the reasonableness of its particular related party transactions from the general anti-tax avoidance perspective. Further, various companies may also would like to conduct internal review on their related party transactions to assess the potential TP risks and necessary solutions to handle such risks. We have served man clients in such areas.

TP dispute resolution

Generally, if the tax authorities disagree with the TPD or other documents submitted and require the companies to conduct special tax adjustments on their related party transactions, the relevant tax impact will be significant. Further, late tax payment interest charges and other penalties may also be involved. In such cases, we can help our clients to apply or negotiate with the tax authorities to obtain acceptable results.

Contact Us
Floor 13, Asia Mansion, 650
Hankou Road, Huangpu District,
Tel:+86(21)6135 6268
Fax:+86(21)6135 6267