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SAT Releases New Bulletin to Strengthen Transfer Pricing Administration on Intra-group Outbound Charges

Tax Analysis:April 9, 2015/China

China’s State Administration of Taxation (“SAT”) released its Bulletin on Enterprise Income Tax Issues concerning Outbound Payments to Overseas Related Parties (Bulletin [2015] No. 16) on 18 March 2015. This Bulletin formalizes several previously announced positions for dealing with service fees and royalties being paid to overseas related parties. (Tax Analysis:April 9, 2015/China)

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Bulletin 16 is intended to reaffirm basic principles and clarify administrative requirements for intra-group outbound charges, and is one of China’s initiatives to align with global efforts to combat tax avoidance.

This newsletter explains following topics;

(1) Background
(2) Highlights of Bulletin 16
(3) Deloitte's Observation
(4) Non-deductibility vs. special tax adjustment
(5) Benefit Test on Service Fee
(6) Value Creation and Contribution Test on Royalty Payments
(7) Burden of Proof
(8) Tax Authorities’ New Angles in Examination
(9) Recommendations

 

>> Click for Japanese [国家税務総局が国外関連者への費用支払に係る移転価格管理の強化に関する公告を公布]

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