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Unveiling of long-awaited Special Tax Adjustments Implementation Measures
China's new Corporate Income Tax Law ("CIT Law"), together with its Detailed Implementation Regulations ("DIR"), introduced a set of anti-avoidance measures in Chapter 6 - Special Tax Adjustments. It may well be the most complex chapter of the CIT Law, encompassing not only exploratory new concepts such as cost sharing, controlled foreign corporations, thin capitalisation, general anti-avoidance, but also imposing mandatory contemporaneous transfer pricing documentation requirements, that could altogether cause significant impact to taxpayers.
On 8 January 2009, the State Administration of Taxation (the "SAT") formally approved a circular entitled Guo Shui Fa [2009] No. 2 ("Circular 2"), and distributed it on 9 January 2009. Circular 2 contains the final version of the "Implementation Measures of Special Tax Adjustments (Trial)" ("the Measures"), which lay out detailed rules on administering all the aspects covered by special tax adjustments.
This final version of the Measures has been eagerly awaited by taxpayers and practitioners since the SAT issued a draft version in March 2008.
In this issue, we look at the following topics:
- What's inside the Measures?
- What to achieve for the SAT?
- How to impact taxpayers?
- Definition of related parties
- Annual disclosures of related party transactions
- Transfer pricing documentation
- Transfer pricing methods
- Transfer pricing investigations and adjustments
- Advance pricing arrangement
- Cost sharing agreements
- Controlled foreign corporations
- Thin capitalisation
- General anti-avoidance rules
- Corresponding adjustments and international negotiation
- Legal liabilities
- Supplementary provisions
- How do taxpayers respond to the Measures?
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Read more by downloading our China Tax/Business News Flash (Jan 2009, Issue 1) (pdf file, 155KB) for your reference.
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