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RISK MANAGEMENT FOR TRANSFER PRICING AND ANTI-TAX AVOIDANCE

Transfer pricing (TP) is always a very complicated, quickly developed and controversial issue in international tax field. All countries are keeping on enhancing transfer pricing legislation and enforcement to protect their revenue. A chapter named “special tax adjustment” is incorporated in China’s new Enterprise Income Tax Law to regulate Transfer Pricing and other relevant tax issues. This means that China’s TP legislation was greatly moved forward. We can anticipate that Chinese tax authorities will dramatically enhance TP enforcement in the future. As financial/tax staff, facing with the complicated and fast developing legislation and enforcement TP environment, we shall learn and understand how to manage the risk of transfer pricing and minimize company’s tax burden legitimately

Through analysis of the character and the newest changes of Chinese and international transfer pricing legislation and enforcement environment, introduction of relevant transfer pricing concepts and transfer pricing methods, and case studies of Chinese transfer pricing audit cases, this course introduces and analyzes the concepts and methods of transfer pricing risk management.

Training Objectives

Understand the basic concepts relevant to transfer pricing
Understand tax planning strategy through transfer pricing
Understand how to prepare transfer pricing documentation
Understand other special tax adjustment requirements in the new enterprise income tax law
Understand how to manage transfer pricing risk

 

Training Attendees

Director, supervisor
CEO, CFO
Finance controller, finance manager, tax director, tax manager
 
 
       
Training Outline
 


Basic knowledge of transfer pricing
 
  • Nature of transfer pricing and how to understand transfer pricing from the international taxation perspective
    •  
  • OECD transfer pricing guideline ——Bible of transfer pricing field
    		•
     
  • Arm’s length principle——basic principle for pricing related party transactions and the base for transfer pricing analysis
    		•
     
  • Evolution of Chinese transfer pricing regulations ——from discrete circulars to a chapter of the income tax law
    •  
  • Definition of related party and related party transaction ——stricter criteria
    		•


    Choice of transfer pricing method
    The selection of TP method is the base for TP planning, TP documentation, and APA. However comparability is the major criteria for selection of TP method.
     
  • Traditional methods:
    		•
      - Comparable uncontrolled price method(CUP)
      - Resale price method (RSP)
      - Cost plus method
     
  • Non-traditional methods:
    •   - Transaction net margin method (TNMM)
      - Profit split method


    Advance pricing agreement (APA)——the best method to manage transfer pricing risk
     
  • What is advance pricing agreement
    		•
     
  • Bilateral/multilateral APA ——address transfer pricing issue completely
    •  
  • Unilateral APA ——address transfer pricing issue in one tax jurisdiction
    		•
     
  • Process for application and negotiation
    		•
     
  • Who is suitable for APA——not all entities and related party transactions are suitable for applying APA
    •  
  • Points should be considered in application and negotiation APA


    • Provision of related party transaction information and transfer pricing documentation
     
  • Information provision requirements in the new income tax law
    		•
     
  • Cost sharing agreement
    		•
     
  • Transfer pricing documentation——documents verifying related party transactions conducted in accordance to arm’s length principle


    • Transfer pricing audit
     
  • How to choose the audit targets
    		•
     
  • Audit process——desk analysis and site investigation
    •  
  • Possible results——payment of tax and interest, double taxation, strict ongoing supervision, and management time cost etc.
    •  
  • How to deal with TP audit——some issues should be considered in dealing with TP audit


    • Other special tax adjustment regulations
     
  • Thin capitalization——regulate the ratio of equity finance and debt finance from related party
    •  
  • Controlled foreign company(CFC)——regulate the delay payment of taxation
    •  
  • General anti-tax avoidance rule (GAAR)——emphasize the business purpose of any arrangement
    		•


    Transfer pricing risk management
     
  • How to manage TP risk ——summary of TP risk management methods
    		•
     
  • Prior management——minimize TP risk
    		•
     
  • Contemporary management——control TP risk
    		•
     
  • Subsequent management——minimize the loss of TP audit


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