The Chinese Approach to Transfer Pricing: Problems Faced and Paths to Improvement

31 Pages Posted: 15 May 2016 Last revised: 27 Apr 2017

See all articles by Jingyi Wang

Jingyi Wang

Peking University - Peking University School of Transnational Law

Date Written: May 11, 2016

Abstract

With the increasing integration of the Chinese market into the global economy, China’s tax policy on transfer pricing and its tax administration influence extremely large numbers of cross-border transactions between China and other states. China has suffered heavy revenue loss from transfer pricing manipulation. Since 2008, Chinese tax authorities have paid special attention to such tax avoidance methods. By examining the Chinese approach to transfer pricing based on publicly available information, this article analyses the reasons for the perceived aggressiveness of Chinese tax authorities in dealing with transfer pricing issues, and the inconsistency between the statutory endorsement of the arm’s length principle and the approach adopted in practice by tax authorities. Measures to improve the efficiency of the administration of transfer pricing in China are proposed.

Keywords: Arm’s length transactions, China, Foreign investment, Tax administration, Tax avoidance, Transfer pricing

Suggested Citation

Wang, Jingyi, The Chinese Approach to Transfer Pricing: Problems Faced and Paths to Improvement (May 11, 2016). British Tax Review, Issue 1, p. 89, 2016; University of Hong Kong Faculty of Law Research Paper No. 2016/016. Available at SSRN: https://ssrn.com/abstract=2778450

Jingyi Wang (Contact Author)

Peking University - Peking University School of Transnational Law ( email )

Peking Univ. Shenzhen Campus
University Town, Xili, Nanshan District
Shenzhen, 518055
China

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