State Taxation Administration, Announcement on Matters Relevant to Application of the Simplified Procedure to Unilateral Advance Pricing Arrangements

For other matters of unilateral advance pricing arrangements where there is no specific provision herein, the Announcement on Matters Relevant to Improving the Administration of Advance Pricing Arrangements shall apply (Article 9).

Main contents: An enterprise may apply for the application of the simplified procedure if the amount of affiliated transactions occurring in each of the three years prior to the tax year in which the day on which the competent tax authority served a Tax Matter Notice concerning acceptance of the application falls is at least RMB 40 million and any of the following conditions is satisfied:

(1)        it has provided to the competent tax authority the contemporaneous documentation for the three tax years prior to the tax year in which it proposes to submit the application and such documentation complies with the State Taxation Administration, Announcement on Matters Relevant to Improving the Administration of Affiliated Party Filings and Contemporaneous Documentation;

(2)        in the 10 tax years prior to the tax year in which the date on which the enterprise submits the application falls, it had implemented an advanced pricing arrangement and the outcome of such implementation complied with the requirements of the arrangement; or

(3)        in the 10 tax years prior to the tax year in which the date on which the enterprise submits the application falls, it was subject to a special tax investigation and adjustment by the tax authority and the case has been closed (Article 3).

The Announcement further relaxes the conditions for applying for the simplified procedure for unilateral advance pricing arrangements, including abolishing the provision requiring an enterprise to submit contemporaneous transfer pricing information at least three months in advance, the provision on not accepting the application if the annual affiliated business transaction report contains errors, and the provision on non-acceptance in the event of a material change in the affiliated transactions, business environment or functional risks when comparing the applicable period with previous tax years. It expressly specifies that if an enterprise refuses to cooperate with an authority in its conduct of on-the-spot functional and risk interviews, the competent tax authority will not accept the applications submitted by it.