Closing loopholes: New transfer pricing rules target MNCs

New rules issued by the State Administration of Taxation reflect China's localization of the Base Erosion and Profit Shifting (BEPS) Action Plan and the beginning of the nation's transfer pricing (TP) documentation and administration regime.

The BEPS, an international tax reform project endorsed by the G-20 and led by the Organization for Economic Cooperation and Development (OECD), is aimed at fighting international tax avoidance and achieving fairness in the global tax system. The Announcement on Matters Relevant to Improving the Administration of Affiliated Party Filings and Contemporaneous Documentation (Announcement 42), released on June 29, 2016, reflects not only the experience that the Chinese tax authorities have gained in recent years but also their technical positions with respect to TP practice.