China Transfer Pricing Policy

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TP-Q-10
Why kinds of scenarios will be adopted TP policy? What is the relevance between DTA and TP policy?

TP-A-10
When China Tax entity would like to pay out whatever business profits, Royalty, Technical Services fees, Interests, trading amount, etc., it will adopt DTA tax rate. Its judge criteria, please see the China Treaty Page. But if want to verify the above-mentioned amount if reasonable, will adopt China TP Policy.

TP-Q-20:
在中國甚麼情況下, WFOE 外商投資企業不需要同時處理TP 申報和文件申報?
What are the scenarios in China, that a Wholly Foreign-Owned Entity (WFOE) is exempted from compliance of Transfer Pricing (TP) declaration and TP documentation?

TP-A-20:
*If the enterprise’s related party transactions are only between the enterprise and its domestic related parties, the enterprise may be exempted from the preparation of the Master File, Local File, and Special Issue File.

For enterprises with an APA, related party transactions that are covered under the concluded APA may be exempted from the preparation of local files and special issue files.

TP-Q-30:
在中國甚麼情況下, WFOE 外商投資企業需要向該國的稅務局發送TP申報? 甚麼是申報單名稱?
What are the scenarios in China, that a Wholly Foreign-Owned Entity (WFOE) is required to submit TP declaration to the country’s tax bureau? What is the name of the TP declaration form?

TP-A-30:
Related Party Transactions Reporting – All taxpayers are required to prepare.
Special Issue File – If companies are involved in cost sharing arrangement (CSA) or Related party debt/equity ratio > 2 (5 for a financial institution).

TP-Q-40:
在中國甚麼情況下, WFOE 外商投資企業需要向該國稅務局發送TP 申請和文件? 甚麼 declaration 表單名和文檔名?
What are the scenarios in China, that a Wholly Foreign-Owned Entity (WFOE) is required to submit TP declaration and TP documentation to the country’s tax bureau? What are the name of the TP declaration form and TP documentation forms?

TP-A-40:
Related Party Transactions Reporting – All taxpayers are required to prepare.
Special Issue File – If companies are involved in cost-sharing arrangement (CSA) or Related party debt/equity ratio > 2 (5 for a financial institution).

Local File – Annual trade value > 200million or Annual RP Transaction for financial assets value > 100 million, Other RP transactions > 40million (eg: interest on intercompany loans)

Master File – Annual RP Transaction > 1billion or have cross-border RP transactions and Master file is already available by the group level.

CbC Report – Consolidated income > 5.5 billion or appointed by Group as the reporting entity for CbC Report.

China TRANSFER PRICING for professionals

Overview
China transfers pricing rules apply to both cross-border and domestic transactions between associated companies.

Associated enterprises

This is mentioned in Article 109 of the Implementation Rules of the EIT Law include the following:

1. One party directly or indirectly holds a total of 25% or more of another party’s shares; a third party holds, directly or indirectly, 25% or more of the shares of both parties.
2. Debts owed by one enterprise to another enterprise reach 50% of the enterprise’s capital.
3. More than half of one party’s senior management personnel, or at least one member of the BOD who can exert control over the BOD is appointed by another party.
4. One enterprise’s normal production and operation activities are dependent on intangibles licensed from another enterprise
5. Purchases or sales or provision of services’ decisions are controlled by another enterprise.

Acceptable Transfer Pricing method

1. Comparable Uncontrolled Price (CUP)
2. Resale price
3. Cost-plus
4. Transactional profit split
5. Transactional net margin

Conditions that qualify for Exemption for TP documentation preparation

1. Annual Related Party purchase/ sales is less than RMB 200 million.
2. Related party transactions are covered by an APA.
3. Foreign shareholding in the enterprise is less than 50% and the enterprise only transacts with domestic related parties.

Due dates and respective threshold:

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