By Agnes Lo, Associate Professor of Teaching, Lingnan University, Hong Kong & Raymond Wong, Associate Professor, City University of Hong Kong
China’s State Taxation Administration, on 29 October, published the 2019 Advance Pricing Arrangement Annual Report, providing statistics on advance pricing arrangements signed between taxpayers and the China State Taxation Administration from 2005 to 2019.
The statistics analyse the signed advance pricing arrangements by year, transaction type, region, industry, time taken to conclude, and transfer pricing method adopted.
The report reveals that the China State Taxation Administration concluded 21 advance pricing arrangements in 2019.
This record represents a historical high since 2013, and likely reflects the increased resources invested in the advance pricing arrangement by the China State Taxation Administration.
Among these 21 signed arrangements, 12 cases are unilateral arrangements and 9 cases are bilateral arrangements.
The report also shows that in 2005–2019, the transactional net margin method was used in 79.3% of all advance pricing arrangements, followed by the cost-plus method (9.6%), the profit-split method (4.8%), the comparable uncontrolled price method (2.9%), and the resale price method (0.5%).
The transactional net margin method remains the most commonly used transfer pricing method for all the individual years when comparing with all prior reports.
However, the number of cases that used the profit-split method also sharply increased from zero in 2018 to five in 2019 and is equal to the total sum of cases for the prior 14 years.
This changing trend responds to a request, stated in the 2018 report, urging companies to provide more information to the tax authorities during the review and evaluation phase that facilitates the use of the profit-split method or the resale price method for advance pricing arrangements.
Agnes W.Y. Lo
Professor Lo has been a faculty member at Lingnan University for more than 15 years.
She mainly teaches Taxation that covers a wide range of topics including international tax planning, transfer pricing, and tax policy and its relevance to society. Her primary research areas include corporate governance and disclosure, and tax avoidance in general and avoidance through transfer pricing in particular.
Professor Lo co-authored a book entitled “International Transfer Pricing in China: Post WTO”, the content of which was used as training materials for the HKICPA workshops.
She has also published her work in the mainstream accounting journals including The Journal of the American Taxation Association, Journal of Corporate Finance, Journal of Accounting and Public Policy, International Tax Journal, etc.
Latest posts by Agnes W.Y. Lo (see all)
- China simplifies unilateral advance pricing arrangement procedures for some taxpayers - April 1, 2021
- China signed 21 advance pricing arrangements in 2019, report shows - November 17, 2020
- Hong Kong revises transfer pricing guidance on advance pricing arrangements - July 23, 2020
- Hong Kong revises guidance on advance tax rulings - April 29, 2020
- China simplifies procedure for claiming tax treaty benefits - November 17, 2019
Dr. Raymond M. K. Wong
Dr. Raymond Wong currently serves as Associate Dean (Undergraduate Programmes) of the College of Business at City University of Hong Kong. During his tenure in City University of Hong Kong, he has taken up various executive roles and has been contributing tremendously to the Department’s undergraduate education program.
He obtained substantial experiences in handling academic and administrative issues related to teaching and learning, globalization in accounting education, and knowledge transfers. One of his primary research interests is about taxation, with particular focus on reporting of related-party transactions and transfer pricing issues in China.
His research also covers accounting and auditing issues in China and his work appeared in several leading accounting and finance journals.
Latest posts by Dr. Raymond M. K. Wong (see all)
- China simplifies unilateral advance pricing arrangement procedures for some taxpayers - April 1, 2021
- China signed 21 advance pricing arrangements in 2019, report shows - November 17, 2020
- Hong Kong revises transfer pricing guidance on advance pricing arrangements - July 23, 2020
- Hong Kong revises guidance on advance tax rulings - April 29, 2020
- China simplifies procedure for claiming tax treaty benefits - November 17, 2019
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