According to Article 12 of the Announcement on Improving the Management of Advance Pricing Arrangements in State Taxation Administration of The People's Republic of China, People's Republic of China (PRC) (State Taxation Administration of The People's Republic of China Announcement No.64, No.2016): "The advance pricing arrangement adopts the quartile method to determine the price or profit level. During the implementation of the advance pricing arrangement, if the actual operating results of the enterprise in that year are outside the quartile range, the tax authorities may adjust the actual operating results to the median of the quartile range. If the weighted average value of the annual operating results of an enterprise is lower than the median value of the interval and has not been adjusted to the median value after the implementation of the advance pricing arrangement expires, the tax authorities will no longer accept its application for renewal.

In the process of implementing bilateral or multilateral advance pricing arrangements, in case of the above problems, the competent tax authorities shall promptly report the relevant information to State Taxation Administration of The People's Republic of China. "