What is an advance pricing arrangement?
APA is one of the effective ways to solve tax disputes in advance and improve tax certainty, especially bilateral or multilateral APA can solve tax disputes between different tax jurisdictions in advance, thus effectively avoiding double taxation.
Japan is the first country in the world to apply advance pricing (which is called prior confirmation system) to practice. As early as 1987, Japan incorporated advance pricing into the legislative framework of transfer pricing in the form of circular. Since 1998, APA arrangement was written as "other reasonable methods in the transfer pricing adjustment method" in "Regulations on Tax Administration of Business Transactions between Associated Enterprises (Trial)", China's transfer pricing system has been gradually improved with the development of practice, effectively safeguarding China's tax rights and interests.
The advance of the advance pricing arrangement in China can be roughly divided into three stages: the first stage is the formal establishment of the advance pricing system, which is marked by the fact that the detailed rules for the implementation of the Tax Administration Law in 2002 (the State Council Order No.362) were included in the advance pricing system, and the advance pricing was upgraded from the adjustment method of transfer pricing to a system. In the second stage, the specific operating procedures of advance pricing are specified in detail, marked by the Implementation Rules of Advance Pricing for Business Transactions between Associated Enterprises (Trial) issued by State Taxation Administration of The People's Republic of China in 2004 (Guo Shui Fa [2004]118). Since 2005, State Taxation Administration of The People's Republic of China has implemented the advanced pricing monitoring management system, and China's advanced pricing management has entered a new stage of standardized development. The third stage began in 2009 with the release of the Implementation Measures for Special Tax Adjustment (Trial) (Guo Shui Fa [2009] No.2). The trial measures further clarified the system and operational norms of China's advance pricing arrangements, and formulated the negotiation procedures and specific provisions of bilateral advance pricing arrangements. At this stage, it has realized the connection with the enterprise income tax law and its implementation regulations.
From the specific practice, the first unilateral advance pricing in China occurred in 1998; In April 2005, China and Japan reached the first bilateral advance pricing arrangement. In 2005 1 month/day ~ 20 1 51February 3 1 day, China * * * signed 70 unilateral APAs and 43 bilateral APAs, accounting for 62% and 38% of the total APAs respectively.
/kloc-6 major changes have taken place in the management of advance pricing arrangements since 0/2.
From 20 16 1 February1day, Announcement No.64 will replace all the contents of Chapter VI Management of Advance Pricing Arrangements in the Implementation Measures for Special Tax Adjustment (Trial) (Guo Shui Fa [2009] No.2, hereinafter referred to as Document No.2). In what ways did Announcement No.64 further improve the management of advance pricing arrangements? State Taxation Administration of The People's Republic of China made an induction in the interpretation of the document. Mande enterprises obey the angle of advance pricing negotiation and signing by grass-roots tax authorities, and analyze the main changes of Announcement No.64 that need attention.
① Decentralization of acceptance authority
Announcement No.64 delegated the authority to accept the advance pricing arrangement, and changed the accepting authority of the advance pricing arrangement from "the tax authority above the city with districts and autonomous prefectures" to "the competent tax authority". Article 2 1 of Announcement No.64 explains that the competent tax authorities refer to the tax authorities responsible for special tax adjustment matters. Mande Enterprise Service understands that the acceptance authority is equivalent to being delegated to the county (district) bureau by the tax authorities at or above the municipal level.
② Integrate and adjust the advance pricing process.
From the previous "preparatory talks, formal application, review and evaluation, consultation, signing arrangement and monitoring arrangement" to "preparatory talks, intention of signing, analysis and evaluation, formal application, negotiation and signing and monitoring implementation". Among them, the greater changes are the increase of the intention to talk about signing and the adjustment of the order of formal application and analysis and evaluation. Such adjustment is more conducive to improving the efficiency of negotiation and signing between tax and enterprise and ensuring the success rate of advance pricing signing.
③ Eight new priority cases were added.
Eight new situations have been added, and the tax authorities can give priority to the applications submitted by enterprises. For example, the enterprise related declaration and the corresponding data are complete, reasonable and fully disclosed; The enterprise's tax credit rating is Grade A; The tax authorities have implemented special tax adjustments for enterprises and have closed the case; Conforming to the renewed advance pricing arrangement; The application materials submitted by the enterprise are complete, the value chain or supply chain analysis is complete and clear, and regional special factors such as cost saving and market premium are fully considered; Enterprises actively cooperate with the negotiation and signing; The tax authorities of the other contracting party involved in bilateral or multilateral advance pricing have a strong willingness to negotiate and sign, attach great importance to it, and other factors that are conducive to negotiation and signing.
④ Four cases of refusing to negotiate and sign are added.
First, the pricing principle and calculation method to be adopted in the draft application for advance pricing arrangement are unreasonable, and the enterprise refuses to negotiate and adjust; Second, the enterprise refuses to provide relevant information or the information provided does not meet the requirements of the tax authorities, and fails to make corrections or corrections on time; Third, the enterprise refuses to cooperate with the tax authorities to conduct on-the-spot interviews on functions and risks; The fourth is the bottom clause, that is, other situations that are not suitable for negotiation and signing.
⑤ Add three situations of suspension and termination.
If the tax authorities find that the enterprise or its related parties deliberately fail to provide the necessary information related to the negotiation and signing, or provide false and incomplete information, or there are other uncooperative situations, which makes it difficult to reach an agreement on the advance pricing arrangement, they can suspend or terminate the advance pricing procedure.
⑥ Regularly exchange unilateral advance pricing arrangement information.
In accordance with the relevant provisions of international conventions, agreements and agreements concluded with foreign countries, the unilateral advance pricing arrangements signed after April 20 16 1 will regularly exchange information with the tax authorities of other countries (regions). The competent tax authorities should also inform the enterprise that when signing the unilateral advance pricing arrangement, it is necessary to provide a list of the countries (regions) where its ultimate holding company, the direct holding company at the next higher level and the overseas related parties involved in the unilateral advance pricing arrangement are located.
An example to explain the difference between the old and new management regulations of unilateral advance pricing
In Announcement No.64, the procedure of advance pricing arrangement is clearer and the operability is further improved. Since Announcement No.64 came into effect on 20 16 1 February1day, there is no real case for reference at present. Therefore, in combination with the actual situation, we assume a case and make a comparative analysis of some management differences before and after Announcement No.64, which only involves unilateral advance pricing by the State Taxation Bureau or the Local Taxation Bureau.
case
An OEM (OEM) enterprise was established in March 2009, with a registered capital of100000 USD. The investor is an enterprise registered in the British Virgin Islands, and its main business scope is the production and processing of electronic products. The purchase and sale of this enterprise are all related transactions. From 20 13 to 2016, the amount of related transactions of this enterprise is 39 million yuan, 48 million yuan, 52 million yuan and 55 million yuan respectively. From 20 13 to 2016, the enterprise made the related declaration on time, and prepared, saved and provided the information of the same period as required. Now, in order to obtain the stability of tax revenue, the enterprise puts forward the intention of negotiating and signing the advance pricing arrangement to the tax authorities.
discrepancy
(1) the differences between the tax authorities that accept and approve.
According to the provisions of Circular No.2, the tax authorities at or above the city or autonomous prefecture with districts can accept the advance pricing arrangement, and then report it to State Taxation Administration of The People's Republic of China for examination and approval. According to the requirements of Announcement No.64, not only the level of the accepting authority is changed to the competent tax authority, but also after the competent tax authority and the enterprise reach an agreement on the text of the unilateral advance pricing arrangement, the legal representatives of both parties or representatives authorized by the legal representatives can sign the unilateral advance pricing arrangement, and the competent tax authority only needs to report the signing situation to State Taxation Administration of The People's Republic of China for filing.
② Differences in acceptance conditions
According to Circular No.2, if an enterprise applies for an advance pricing arrangement after 20 15 years, the tax authorities can accept it. However, according to the requirements of Announcement No.64, enterprises apply for advance pricing arrangements in different time periods, and their acceptance is different: in case 1, enterprises put forward the intention of advance pricing arrangements in 20 16, and the tax authorities cannot accept their application for advance pricing arrangements because the related transactions in 20 13 did not reach more than 40 million yuan; In case 2, the enterprise put forward an advance pricing arrangement in 20 17, and the competent tax authorities delivered the Notice of Tax Matters to the enterprise in that year to receive its intention to negotiate and sign. The enterprise did not prepare, save and provide the information of the same period as required, but the enterprise effectively explained the contents involved in analysis and evaluation as required, and the competent tax authorities could accept its application for advance pricing arrangement; In case 3, the basic conditions are as in case 2, but the enterprise has prepared, saved and provided the information of the same period according to the regulations, and the competent tax authorities can give priority to accepting the application submitted by it.
③ Differences in preparation before formal application stage.
According to the requirements of Circular No.2, the contents of audit and evaluation are that after the formal application, before the formal application, both tax and enterprise only communicate on basic issues. According to the requirements of Announcement No.64, before the formal application stage, enterprises need to prepare a large number of documents and materials, including the production and operation situation in recent years, the functional risk description of related parties, the value chain analysis and the analysis of regional special factors, etc., in order to cope with the "early investigation" of tax authorities.
④ Review and evaluate or analyze the differences of evaluation contents.
Announcement No.64 places special emphasis on value chain analysis and regional special factors, which is not explicitly required in Document No.2.. In this case, the enterprise must analyze the functional risks of its upstream and downstream enterprises, its own functional risk positioning in the value chain and its market environment, so as to effectively communicate with the tax authorities and better reach an agreement with them on the transfer pricing policy.
⑤ Differences in information disclosure
Once the tax authorities and enterprises have signed the unilateral advance pricing arrangement, according to the requirements of Announcement No.64, State Taxation Administration of The People's Republic of China can exchange information with the tax authorities of other countries (regions) on the text of the unilateral advance pricing arrangement in accordance with the relevant provisions of international conventions, agreements and agreements concluded with foreign countries, except for information related to national security, which is also not required in Circular No.2.