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 Should transportation and logistics companies in China prepare related party transactions disclosure forms and contemporaneous transfer pricing documentation?
Nowadays, transfer pricing ("TP") is a crucial topic in China Transportation and Logistics ("T&L") industry. Intermodal transportation, third-party logistics services, charter hiring, freight forwarding, warehousing, terminal and port operation may involve significant related party transactions ("RPT") within a logistics group. Under the current market downturn condition, T&L multinational companies with much direct investment in China may repatriate cash from China by way of service payments, interest, royalty, rental, etc, which could lead to potential TP adjustment risks.
It is recommended that T&L companies in China should review their RPT carefully and determine whether TP documentation ("TPD") is required for 2008. Putting in place the TPD is more than just a compliance requirement. It could serve as an effective tax planning and risk management tool, which could be an investment to avoid potentially significant actual and opportunity costs.
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