China adopts many BEPS proposals and introduces more stringent transfer pricing requirements

Over the last two decades, China has experienced significant economic development and has also actively developed its transfer pricing (TP) landscape. Since the Chinese State Administration of Taxation (SAT) released its first comprehensive TP regulation in early 2009, the SAT has aimed to protect China’s revenue base by enforcing the arm’s length principle for intercompany transactions. Following the September 17, 2015 release of the Organisation for Economic Co-operation and Development’s base erosion and profit shifting (BEPS) Action Plan, the SAT issued a draft circular titled “The Discussion Draft on The Implementation Measures of Special Tax Adjustments.” The SAT’s proposals indicate that China will adopt certain guidelines from the BEPS 2015 Final Reports, with the intent to ensure companies are more transparent in information disclosure and analysis requirements.