Regulations Governing Assessment of Profit-Seeking Enterprise Income Tax on Non-Arm's-Length Transfer Pricing
When profit-seeking enterprises and the collection authorities-in-charge determine the most appropriate Arm’s-length Method as set forth in Subparagraph 2 of Article 7 hereof, the determination shall be made based on the transaction types of Controlled Transactions applying Articles 10 to 13 respectively, and based on the following two criteria.
1. Degree of comparability: The determination shall be made based on the degree of comparability between the profit-seeking enterprise and its Controlled Transactions and the comparables. The factors set forth in the first Paragraph of the preceding Article shall be taken into consideration; in particular, special attention shall be drawn to the similarities of those specific factors set forth in Paragraph 2 of Article 14, Paragraphs 2 to 4 of Articles 15, Paragraph 4 of Article 16, Paragraph 3 of Article 17, Paragraph 7 of Article 18 and Paragraph 2 of Article 19. The greater the degree of comparability, the higher will be the applicability of the methods.
2. Quality of the data and assumptions: The determination shall be made based on the factors, including: the completeness, accuracy and adequacy of the data collected to identify the differences as set forth in the preceding paragraph, the possibility and appropriateness of making adjustment in accordance with the second Paragraph of the preceding Article to eliminate such differences, and the reasonableness of the assumptions made. The better quality of the data and assumptions, the higher applicability of the methods will be.