Profit-seeking enterprises undertaking Controlled Transactions shall determine the Arm’s-length result of the Controlled Transactions and report the taxable income in accordance with the criteria set forth in the ITA and these Assessment Regulations. Where the profit-seeking enterprises failed to comply with the Assessment Regulations thereby resulting in a reduction of tax payable, and the collection authorities-in-charge have made transfer pricing adjustments and assessed the taxable income of related taxpayers in accordance with the ITA and these Assessment Regulations, Article 110 of ITA shall apply to the following specific tax omission or under-reporting situations:

1. 

The reported price of Controlled Transaction is two times or more than the Arm’s Length price assessed by the collection authorities-in-charge; or lower than 50% of the Arm’s-length price.

2. 

The increase in taxable income of the Controlled Transactions adjusted and assessed by the collection authorities-in-charge is more than 10% of the annual taxable income of the enterprise; and more than 3% of the annual net operating revenue.

3. 

A profit-seeking enterprise cannot produce transfer pricing report as required under Paragraph 1 of Article 22 thereof, and no other documents evidencing the transactions is Arm’s-length result.

4. 

The increase in taxable income of the Controlled Transactions, which are not disclosed in the report or transfer pricing document in accordance with Articles 21 to 22-1 by a profit-seeking enterprise, adjusted and assessed by the collection authorities-in-charge is more than 5% of the annual taxable income of the enterprise; and more than 1.5% of the annual net operating revenue.