New Taxation Implementations Measures Go back »

2009-01-12 | All chapters

Dear Members,

The long-awaited “Implementation Measures of Special Tax Adjustments (Trial)” (the “Measures”) were signed by China's State Administration of Taxation (the "SAT") on 8 January, 2009 and formally issued on 9 January 2009 in the form of Guo Shui Fa [2009] No. 2.

We are pleased to share with you detailed analysis we have received from our members PWC and Deloitte.

The PWC unofficial English translation can be found  here : implementation_measures_of_special_tax_adjustments_unofficial_translation_by_pwc

PWC also released a newsflash with detailed information :  pwc_news_flash_2009_01_en

Please find also attached a Tax Analysis and FAQ published by Deloitte :

deloitte_tax_analysis-_tp_110109

deloitte_new_transfer_pricing_requirements_in_china_-_faq

The major changes from that March 2008 draft version that are included in
the Measures are listed below:

There is no simplified documentation option in the Measures.

The threshold amounts for exemption from the contemporaneous
documentation requirements have changed from RMB20M for any type of
transaction in the March draft rules to RMB200M for purchases and sales
transactions and RMB40M for other types of transactions (i.e., services,
royalties, interest, etc.) in the Measures.

Enterprises can also be exempt from the preparation of contemporaneous
documentation (regardless of whether or not their related party
transactions exceed the above thresholds) if: i) the foreign
shareholding of the enterprise is below 50 percent and the enterprise
only has domestic related party transactions; or ii) the related party
transactions are covered under an advance pricing arrangement.

The deadline by which Chinese enterprises must have their relevant
contemporaneous transfer pricing documentation in place to avoid an
additional five percent interest levy on transfer pricing adjustments
for the 2008 tax year has been extended to 31 December 2009. For 2009
and future tax years, the contemporaneous documentation must be in
existence by 31 May of the following year.

The final version of related party disclosure forms were released by the
SAT under Guo Shui Fa [2008] No. 114. Those forms will need to be filed
by 31 May 2009 with the 2008 Chinese corporate income tax returns.
Certain important disclosures of Guo Shui Fa [2008] No. 114 may ideally
require documentation to have been substantially drafted by this date.