What Is Advance Pricing?

Advance pricing arrangement (advancepricingarrangement) refers to the taxpayer submits to the tax authority the pricing applicable to the affiliated exchange before the taxpayer engages in the purchase, sale and lease of tangible property, the transfer and use of intangible property, the provision of labor services, and the financing of funds with its affiliated companies. Principles and calculation methods, the tax authorities have confirmed through a series of comparability analysis and rationality review that they comply with the entire process of the principle of fair dealing and business practices. APA is a product of economic globalization in the field of taxation. It is a method for multinational corporations to distribute international income internationally. It is also a model of tax administration's transfer pricing tax management.

Advance pricing arrangements

Right!

Advance pricing arrangement (advancepricingarrangement) refers to the taxpayer submits to the tax authority the pricing applicable to the affiliated exchange before the business of purchasing and selling and leasing of tangible property, the transfer and use of intangible property, the provision of labor services, and the financing of funds with taxpayers Principles and calculation methods, the tax authorities have confirmed through a series of comparability analysis and rationality review that they comply with the entire process of the principle of fair dealing and business practices. APA is a product of economic globalization in the field of taxation. It is a method for multinational corporations to distribute international income internationally. It is also a model of tax administration's transfer pricing tax management.

Chinese name

Advance pricing arrangements

Foreign name

advancepricingarrangement

advantage

Defining the certainty of domestic legal rights of taxpayers, etc.

Defect

Higher costs hinder its widespread adoption

Article 48 of the "Administrative Rules on Taxation of Business Transactions between Affiliated Enterprises (Trial)" issued by the State Administration of Taxation on April 23, 1998 stipulates that "to save the tax audit cost of transfer pricing for business transactions between affiliated enterprises, enterprises are allowed to propose an enterprise and The principles and calculation methods for transfer pricing of transactions between affiliated companies shall be used by the competent tax authorities to verify the taxable income of transactions between affiliated companies and affiliated companies or to determine a reasonable sales profit margin. The enterprise submits an application, provides relevant information, and fills in the "Acknowledgment Form for Advance Pricing Arrangement Confirmation." After review and approval by the competent tax authority, it should sign an advance pricing arrangement agreement with the enterprise and supervise the implementation of the agreement. "Published in September 2002 Article 53 of the Implementation Rules of the Tax Collection and Administration Law of the People's Republic of China also stipulates that "Taxpayers may submit to the competent tax authority the pricing principles and calculation methods for business transactions with their affiliated enterprises. After review and approval by the competent tax authority, Taxpayers agree on pricing matters in advance and supervise their implementation. "However, the above provisions do not provide for the detailed implementation rules such as which areas can apply for advance pricing arrangements, how to apply, what documents need to be provided, and the number of years that can be reserved. After the publication of the "Taxation Management Regulations on Business Transactions between Affiliated Enterprises (Trial)", advance pricing arrangements have been practiced in China. For example, in 1998, based on the foreign taxation bureau of Xiamen State Taxation Bureau, after reaching an agreement with the enterprise, they took the lead in signing an advance pricing agreement with Xiamen Taisong Precision Electronics Co., Ltd. in 1999 regarding the company's business transactions with its affiliated companies in Taiwan. Arrangement agreement, the first in China to apply advance pricing arrangements for transfer pricing tax adjustment. Since 1998, more than 130 enterprises in China have signed unilateral advance pricing arrangements agreements with tax authorities ranging from 1-3 years. But in general, the application of APAs in China's tax practice is not widespread. Judging from the existing APA agreements, the following problems exist:

The validity period is too short. All existing APA agreements in China are valid for less than 3 years. Signing the APA agreement requires a lot of manpower and material resources. Its advantages in reducing the uncertainty of tax adjustment and reducing tax inspection need to be reflected over a relatively long period of time. Therefore, the validity period of the APA agreement should not be exceeded. short.

Mainly unilateral agreements, few bilateral and multilateral agreements, which makes it difficult to fully realize the advantages of advance pricing arrangements.

Lack of uniform rules and APA model agreement.

The "Implementation Rules for Advance Pricing Arrangements for Affiliated Business Transactions between Affiliated Enterprises (Draft)" formulated by the State Administration of Taxation provide detailed provisions for the preliminary stage of advance pricing arrangements, formal application, audit and evaluation, negotiation, signing arrangements, and monitoring and implementation . In November 2003, the International Taxation Department of the State Administration of Taxation and the Organization for Economic Cooperation and Development (OECD) co-sponsored an international seminar on advance pricing arrangements in Guangzhou to discuss the implementation of advance pricing arrangements.