Transfer Pricing: Asia's Tax Men Crack the Whip

You can't request more than 20 challenges without solving them. Your previous challenges were flushed.

Transfer Pricing: Asia's Tax Men Crack the Whip

by Catherine Tse, Mazars, 09 May 2011

topics:
Accounting and Regulations Tax

tags:
advance pricing arrangement (APA) arm's length price China State Administration of Taxation PER 69 transfer pricing

The campaign by tax authorities across Asia to plug loopholes in business taxes from transfer pricing schemes is continuing. Here is a review of recent Asian Transfer Pricing updates.

China

The mainland’s drive to rationalise and strengthen its transfer pricing monitoring system continues apace. For the first time, the China State Administration of Taxation has published comprehensive statistics on both in-progress and completed advance pricing arrangements for the period 1 January 2005 to 31 December 2009.

Released last December, the China Advance Pricing Arrangement (APA) Annual Report 2009 reveals the growing trend of multinationals in China seeking bilateral APAs to secure certainty on transfer pricing issues and to mitigate double taxation risk.

The report contains an introduction to the APA program, its history and development in China, details of APA procedures and related application forms. Mazars Hong Kong can provide a copy of this report to interested parties on request.

Hong Kong

A landmark decision by the Court of Final Appeal has broad implications on transfer pricing practices by taxpayers with offshore related party transactions. In Ngai Lik Electronics Co Lt v CIR, the court held that the Commissioner of Inland Revenue had improperly applied Section 61A of the Inland Revenue Ordinance to deal with the tax-avoidance scheme that Ngai Lik had allegedly conducted.

The Court of Final Appeal allowed Ngai Lik’s appeal. It said that Ngai Lik’s setting up three companies in the British Virgin Islands and the transfer of business to these three BVI entities do not, in themselves, produce any tax benefits to Ngai Lik.

The court remitted the case back to the Internal Revenue Department through the Board of Review, with the direction to raise fresh additional assessments for the years under dispute. Such assessments should be made by applying arm’s length prices.

The IRD is unlikely to stop scrutinising transfer pricing programs. Indeed, the clarity afforded by the Court of Final Appeal should give the tax authorities a better handle on how to deal with transfer pricing schemes in terms of tax assessments.

For companies, the adoption of appropriate transfer pricing methodology and preparation of supporting documentation remain as important tasks as the IRD continues to investigate the transfer prices of related party transactions.

Comment on this article

Your name: *

E-mail: *

The content of this field is kept private and will not be shown publicly.

Homepage:

Comment: *

Web page addresses and e-mail addresses turn into links automatically.
Allowed HTML tags: <a> <em> <strong> <cite> <code> <ul> <ol> <li> <dl> <dt> <dd> <a> <p> <span> <div> <h1> <h2> <h3> <h4> <h5> <h6> <img> <img /> <map> <area> <hr> <br> <br /> <ul> <ol> <li> <dl> <dt> <dd> <table> <tr> <td> <em> <b> <u> <i> <strong> <font> <del> <ins> <sub> <sup> <quote> <blockquote> <pre> <address> <code> <cite> <embed> <object> <strike> <caption>
Lines and paragraphs break automatically.
Use  to create page breaks.

More information about formatting options

Verification Code

This question is for testing whether you are a human visitor and to prevent automated spam submissions.

What is the fifth word in the phrase "peyara yoxofi zeh upiciwu jeg"?: *

Accounting and Regulations

CFO innovation Asia Accounting and Regulation the Asia Pacific resource center for senior finance executives, daily news, analysis, best practice and case studies in Accounting Regulation, IFRS, US GAAP, Tax, investor relations, corporate governance, Corporate Law, Financial Regulators, Internal Audit, Audit, Corporate Law.

Auditing, Investor Relations, Law and Compliance, Tax

Finance and Banking

CFO innovation Asia, Finance and Banking the Asia Pacific resource center for senior finance executives, daily news, analysis, best practice and case studies in Corporate Finance, trade finance, treasury and risk management, capital expenditure, Banking, mergers and acquisitions

Cash and Liquidity Management, Corporate Finance, Insurance, Treasury Management

Management

CFO innovation Asia the Asia Pacific resource center for senior finance executives, daily news, analysis, best practice and case studies in Finance Management, Corporate Governance, Human Resource Management, Compensation and Benefits, Mergers and Acquisitions, Professional Development, Corporate Real Estate, Risk Management, Budgeting and Forecasting, Business Process Management, Business Process Reengineering, Outsourcing.

Budgeting and Planning, Business Expense Management, Human Capital Management, Outsourcing and Shared Services, Risk Management

Metrics

Corporates, Financial Services

Technology

CFO innovation Asia Technology the Asia Pacific resource center for senior finance executives, daily news, analysis, best practice and case studies in Finance Systems, Business Intelligence, EPR, Accounting software, CRM, Cloud Computing, Telecommunications, Business Process Outsourcing, Business Process Management Software.

Business Intelligence, Enterprise Software and Systems, Financial Systems, Security

CFO innovation ASIA