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 19 March published a consultation paper “Announcement of the State Administration of Taxation on the issues concerning simplified procedures for unilateral advance pricing arrangements (consultation paper)”.
The consultation will be closed on 18 April. All comments should be submitted via the designated system on the webpage of China’s State Taxation Administration.
Under the proposal stated in the consultation paper, procedures for the application of unilateral advance pricing arrangements will be simplified and only consist of three steps, as compared to six steps in the ordinary standard procedures.
The first step of the standard procedures – “preparatory meeting” is exempted in the simplified procedures, and the second step (of the standard procedures) – “expression of intention”, the third step – “analysis and assessment”, and the fourth step – “formal application” are combined into one single step, namely “analysis and assessment”.
Together with the “negotiation and signing”, and “monitoring of execution”, only three stages are included in the simplified procedures.
Under the simplified procedures, tax authorities would confirm whether a company’s application for the simplified procedures will be accepted within 90 days. After the confirmation, the tax authorities will negotiate with the firm and finalize the advance pricing arrangement within six months.
The consultation paper explains that the simplified procedures are only applicable for companies with significant related-party transactions and with a high tax compliance level. Thus, the simplified procedures would only be applicable for companies with annual related-party transactions exceeding RMB 40 million (approx. USD 6.1 million) for the three years before applying for the advance pricing arrangement. Also, companies should have provided the local file (and master file, if applicable) for the last three years at least three months before their application for the advance pricing arrangement, have been compliant with their advance pricing arrangements in the prior ten years, or must have been subjected to special tax investigations in any year of the prior ten years where the cases had been closed.
However, tax authorities can reject any applications of simplified procedures if there would be substantial changes in the related-party transactions, business environment, and operational risk between the advance pricing arrangement period and its previous years; the taxpayer is subject to an unclosed special tax investigation; the company fails to file or provide incorrect information in the annual related-party transactions form; the company fails to keep contemporary documentation; or the company is unable to provide the required information for the application.
Furthermore, the simplified procedures are not applicable for cases involving two or more tax authorities in different provinces, autonomous regions, and municipalities.
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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