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  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:
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