Regulations Governing Assessment of Profit-Seeking Enterprise Income Tax on Non-Arm's-Length Transfer Pricing
To apply for an Advance Pricing Arrangement with the tax collection authorities, the Applicant or its agent shall furnish the following documents and reports:
1. Organization charts of Affiliated Enterprises home and abroad.
2. Relevant information on the related parties involved in the transactions being applied for Advance Pricing Arrangement, including an analysis report covering the following six aspects: operation, legal, tax, finance, accounting, and economy as well as the income tax return and financial statements for the three years prior to the application.
3. Relevant information concerning the transaction applying for an Advance Pricing Arrangement:
(1) Name of the related parties involved in the transaction and their relationship with the Applicant;
(2) Type, flow, date, object, amount, price, and contractual terms of the transaction as well as the use of property or services transferred. The use shall include the descriptions regarding whether the property is transferred for sale or use and its benefits; and
(3) The time period covered by the related transaction.
4. The transfer pricing report shall, in addition to being subject to Paragraph 1 of Article 22, specify the following information:
(1) Assumptions affecting the pricing;
(2) An analysis of value contribution and profit allocation of related parties in Controlled Transactions.
(3) In case of adopting an Arm's-length Method not provided in the Regulations, a special analysis along with supporting evidentiary documents explaining the reasons why such method is more suitable than those Arm's-length Methods as provided and how it can achieve an Arm's-length result.
(4) Important financial accounting policies that have a direct impact on the pricing methods.
(5) The material differences in financial accounting and tax laws between the countries involved in the transaction being applied for the advance pricing arrangement and the ROC, provided, however, that such differences would have an impact on the adoption of Arm's-length Method.
5. The pricing information of the same or similar transactions conducted by the Applicant and other related parties.
6. The annual forecast of the operation results and business plans within the effective period of the Advance Pricing Arrangement.
7. Upon filing the application, the explanations or conclusions on issues related to the adoption of the Transfer Pricing method that have occurred or are currently under discussion with local or foreign competent authorities or Advance Pricing Arrangement that have been approved.
8. Whether these issues are related to potential double taxation and whether bilateral or multilateral advance pricing arrangements of tax treaty countries are involved.
9. Other information as requested by the tax collection authorities.
The Applicant or its agent shall attach a table of contents and an index when filing the documents and reports in accordance with the preceding paragraph. If the information to be produced is in a foreign language, a Chinese translation thereof shall also be attached, unless otherwise approved by the tax collection authorities to provide an English version.