Dbriefs Asia Pacific: China Spotlight 

Bulletin 16: A Significant China Tax Guideline on Outbound Payments to Related Parties

Most multinational corporations in China have encountered various challenges on outbound payments to related parties in the past, and outbound payments have been listed as one of the top challenges for multinational corporations doing business in China. To streamline transfer pricing practices in China and in considerations of the BEPS principles, the State Administration of Taxation (SAT) has published Bulletin 16 on 18 March 2015 as a comprehensive guideline regarding outbound payments. We look at:

  • Specific tests and principles in determining the tax deduction entitlement of the service / royalty fees.
  • Practices and cases we have seen since the issuance of Bulletin 16.
  • Consistency between Bulletin 16 and the BEPS Project.
  • The context of China's focus on tax compliance and protecting its tax base, and how to formulate an effective tax controversy strategy in cases of disputes.

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