Tax News Update    Email this document    Print this document  

December 15, 2022
2022-1888

China releases 2021 annual report on Advance Pricing Arrangements

  • China's State Taxation Administration released the 2021 annual Advance Pricing Arrangement (APA) report on 21 November 2022.
  • The Report discusses the implementation procedureof China's APA program, practical developments, and the statistics pertaining to the APA applications concluded from 2005 to 2021.

China's State Taxation Administration (STA) released the 2021 annual APA report (the Report) on 21 November 2022, the 13th edition of the APA report. The Report discusses the implementation procedure of China's APA program, practical developments, and the statistics pertaining to the APA applications concluded from 2005 to 2021.

According to the Report, the STA had signed 125 unilateral APAs and 101 bilateral APAs by the end of 2021, among which 9 unilateral APAs and 11 bilateral APAs were concluded in 2021. The Report indicates that eight APAs in 2021 were signed with Asian countries (regions), representing 72.8% of total bilateral APAs. The other two were signed with North American countries and one with a European country. It continues to be the trend that most APA applicants are engaged in the manufacturing industry. The statistics in the Report also revealed that a majority of the covered transactions related to the transfer of tangible assets, while the other transactions involved the transfer of intangible assets and provision of services.

Despite the slight decrease in the total number of signed APAs in 2021 compared with the prior year, the overall trend indicates a steady growth over the last decade. In July 2021, a simplified procedure for unilateral APAs was rolled out, which significantly shortened the timing of review, negotiation, and conclusion of eligible APA applications. It's expected that the STA will continue to invest in resource needs and improve operating efficiencies for the APA program in the coming years.

China's APA program is an increasingly attractive way to obtain transfer pricing certainty, reduce compliance costs, and avoid or eliminate the risk of double taxation. In addition, the extended benefits of an APA include facilitation of cross-border cash flow resulting from transfer pricing adjustments and resolution for potential customs disputes related to the importation of tangible goods. It's critical that multinationals understand the details of China's APA program and the STA's priority in acceptance of APA requests such that tax controversy matters arising from intercompany transactions can be managed and resolved more effectively.

____________________________

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

 

The information contained herein is general in nature and is not intended, and should not be construed, as legal, accounting or tax advice or opinion provided by Ernst & Young LLP to the reader. The reader also is cautioned that this material may not be applicable to, or suitable for, the reader's specific circumstances or needs, and may require consideration of non-tax and other tax factors if any action is to be contemplated. The reader should contact his or her Ernst & Young LLP or other tax professional prior to taking any action based upon this information. Ernst & Young LLP assumes no obligation to inform the reader of any changes in tax laws or other factors that could affect the information contained herein.

 

Copyright © 1996 – 2024, Ernst & Young LLP

 

All rights reserved. No part of this document may be reproduced, retransmitted or otherwise redistributed in any form or by any means, electronic or mechanical, including by photocopying, facsimile transmission, recording, rekeying, or using any information storage and retrieval system, without written permission from Ernst & Young LLP.

 

EY US Tax News Update Master Agreement | EY Privacy Statement