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SAT Issued New Rules on Reporting of Related Party Transactions and Contemporaneous Documentation
Tax Analysis:13 July 2016/China
On 29 June 2016, the State Administration of Taxation (SAT) issued new regulations (i.e. SAT Bulletin  No. 42, or Bulletin 42) to improve the reporting of related party transactions and contemporaneous documentation. Bulletin 42 will replace the existing transfer pricing documentation regulations in Circular Guoshuifa  No. 2 (Circular 2). In contrast with Circular 2, which comprehensively covered various aspects of special tax adjustments, Bulletin 42 is only concerned with the reporting of related party transactions and contemporaneous documentation. (Tax Analysis:13 July 2016/China)
Bulletin 42 addresses issues that have been the focus of the Chinese tax authorities for a number of years, addressing practical issues they have experienced, and provides a new landscape for transfer pricing practice and management in China. Additionally, the localization and implementation of BEPS Action 13 in China is a new milestone in the internationalization of China's transfer pricing practice.
This newsletter covers the following topics regarding Bulletin 42;
(1) Recognition of related party relationships and related party transactions
(2) Reporting of related party transactions
(3) Contemporaneous documentation
(4) Legal liabilities
(5) Deloitte’s observation
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