(1) transfer pricing tax system

1. Reasonable adjustment right of tax authorities

Where the business dealings between an enterprise and its related parties do not conform to the principle of independent transactions, thus reducing the taxable income or income of the enterprise or its related parties, the tax authorities have the right to make adjustments in a reasonable way.

2. Relevant information of related businesses

When an enterprise submits an annual enterprise income tax return to the tax authorities, it shall attach an annual related business transaction report with its related parties. When the tax authorities conduct relevant business investigations, enterprises and their related parties, as well as other enterprises related to relevant business investigations, shall provide relevant information in accordance with regulations.

3. The tax authority's right to pay taxes.

If an enterprise fails to provide information on business dealings with its affiliated parties, or the information provided is untrue and incomplete, which cannot truly reflect its affiliated business dealings, the tax authorities have the right to verify its taxable income according to law.

4. Additional taxes and interest.

The tax authorities shall make tax adjustments in accordance with the provisions of this chapter, and if it is necessary to pay back the tax, they shall pay back the tax in accordance with the provisions of the State Council and charge interest.

5. Limitations of tax adjustment

If the business between an enterprise and its related parties does not conform to the principle of independent transaction, or if the enterprise implements other arrangements that have no reasonable commercial purpose, the tax authorities have the right to make tax adjustments within 10 year from the tax year in which the business occurs.

6. Monitoring and investigation of cross-border related party transactions

In order to further standardize the management of special tax adjustment and prevent multinational enterprises from transferring the operating losses of overseas enterprises to domestic affiliated enterprises under the background of financial crisis, State Taxation Administration of The People's Republic of China issued the Notice on Strengthening the Monitoring and Investigation of Cross-border Related Transactions.

7. Tracking management of transfer pricing

State Taxation Administration of The People's Republic of China issued the Notice on Strengthening the Tracking Management of Transfer Pricing.