China takes tough stance on transfer pricing for royalty and service payments

China’s State Administration of Taxation (SAT) on March 18 announced that it will no longer permit deductions for royalty fees paid to an overseas related party that did not contribute to the creation of the intangible asset or allow deductions for fees paid to an overseas related party for services that do not provide economic benefit to the subsidiary, writes Dezan Shira & Associates in the March 25 edition of the China Tax Briefing. In its guidance, the SAT listed six instances where deductions for service fees paid to a foreign related party will be disallowed, the firm writes.

See:

• China Tax Briefing

• Announcement (in Chinese)

• Release (in Chinese)

UPDATE 3/37/2015 – See, also:

• PwC

• EY