China’s New Transfer Pricing Guidance

On 1 April 2017, China’s tax authority issued Bulletin 6 – an update to current transfer pricing (TP) rules that introduces more stringent documentation and transaction requirements. The new guidance, effective on 1 May 2017, will affect all multinational companies (MNCs) that carry out cross-border transactions to and from their China entities.


Bulletin 6 in Context

The announcement is part of a series of regulations released by the State Administration of Taxation (SAT) since 2015 to stop MNCs from artificially shifting profits to lower- or no-tax locations. It reaffirms China’s alignment with international efforts to stop tax avoidance through profit shifting.


Implications for International Enterprises

Bulletin 6 is important because it reaffirms, formalises, and clarifies TP practices that tax authorities have been applying in recent years. It also lays out some new procedural directives on how TP audits are to be carried out.

Among other points, Bulletin 6:

  • Reaffirms Chinese tax authorities’ right to investigate and request information from non-resident as well as resident enterprises
  • Reaffirms that tax authorities should investigate the party with the simpler function, which in some cases may be the overseas party
  • Introduces a new form for taxpayers to fill out when they make a self-adjustment
  • States that taxpayers will be temporarily exempted from investigation for transactions that are covered by a Mutual Agreement Procedure(MAP)
  • Details the testing criteria – which are consistent with OECD guidelines – for TP methods and for transactions involving intellectual property rights and intra-group service charges


What should international enterprises do?

With the new guidance, companies can expect increased scrutiny over their transactions. To manage risk, enterprises must assess their intra-group procedures and ensure that the right documentation is prepared and submitted on time.


Please contact our experts at if you require end-to-end TP support or are interested in learning more about this regulatory update.