Ugly Facts About China Transfer Pricing

2009-11-23

Hat tip to Rich at All Roads for his post a few days ago on transfer pricing, which includes several useful links.

This quote in particular got my attention:

[T]he statute of limitation for transfer pricing audits is 10 years and the audit itself can last for 5 years. There are interest and potential interest penalties associated with transfer pricing adjustments and companies have a maximum of 30 days to submit the information required by the tax authorities.

Rich's editorial comment was "ouch." Succinct, yet quite sufficient. I concur.

I'm a corporate and IP lawyer, so transfer pricing is way out of bounds for my normal work. However, I did include a brief discussion of the subject in my FDI Law class lecture on tax issues for foreign investors.

Rich's links would have made my lecture much better. As it is, I have the feeling my students are still basically fuzzy on the subject.

In all seriousness, this subject does come up very frequently with respect to foreign investment projects. I would say that about half of the commercial contracts I deal with and an even higher percentage of corporate setups involve transactions between a parent company and subsidiary, or between a sub and a related entity. And I do know that China has gotten much tougher on transfer pricing in the past few years.

Important subject, even if it is insanely technical and often annoying.

Tags: China Business & Economy, China Law, Transfer Pricing