Tax News Update    Email this document    Print this document  

June 28, 2022

China | Customs and Tax Authorities in Shenzhen launch collaborative management of transfer pricing related to goods imported from related parties

The Shenzhen Customs Authority and Municipal Tax Bureau issued Shenguanshui [2022] No. 62 (Circular 62) on 18 May 2022 to formally launch a new approach to collaboratively manage transfer pricing matters related to goods imported from overseas related parties. This new collaborative management provides institutional standards of transfer pricing to the Customs Authority and is also the first-ever formal cooperation between the customs and the tax authorities in relation to transfer pricing.

The release of Circular 62 may have significant implications for many Shenzhen-based companies in relation to the following aspects:

  • The collaborative management calls for a joint assessment by Shenzhen Customs and the Municipal Tax Bureau on the price of goods imported from overseas related parties, which formulates dual transfer pricing compliance requirements from both tax and customs perspectives.
  • The assessment and confirmation of the price of the goods by both authorities can be completed through a one-time application process. Once an agreement is reached, a memorandum (i.e., Memorandum of Collaborative Management of Transfer Pricing of Related Party Imported Goods) will be signed. Specifically, the Shenzhen Customs will issue an advance ruling on the price of the goods and the Municipal Tax Bureau will sign an Advance Pricing Agreement with the applicants. As such, the predictability of tax costs and certainty on tax compliance will be significantly improved.
  • The collaborative management mechanism provides a consistent approach for the determination, implementation, and subsequent adjustment for the import price of the goods. It is expected to effectively resolve certain issues and challenges facing many multinational companies selling products into Shenzhen, China through their related parties (e.g., in certain cases, double recognition and taxation of income may occur due to lack of coordination between customs and tax authorities).


Circular 62 became effective on the date of issuance. The implementation of this collaborative management mechanism will help improve the compliance of cross-border related party transactions and consistency with respect to tax and customs treatments. Companies that have significant trade activities with their Shenzhen-based related party should pre-assess applicability and potential implications of this new policy and develop their approach to pursue such arrangement. It remains unclear as to whether this collaborative management mechanism will be expanded to other cities.

We will continue to monitor and report on the development of this policy.

For additional information with respect to this Alert, please contact the following:

Ernst & Young Tax Services Limited, Hong Kong

Ernst & Young Ernst & Young (China) Advisory Limited

Ernst & Young LLP (United States), China Tax Desk

Ernst & Young LLP (United Kingdom), China Tax Desk, London

Ernst & Young LLP (United States), Asia Pacific Business Group, New York

Ernst & Young LLP (United States), Asia Pacific Business Group, Chicago