TP & CV
China Customs
2014 WCO REVENUE CONFERENCE
MNEs in China
• China has become the world second largest
country to absorb foreign investment
• 2013, Shanghai Customs has 15 large MNEs
affiliated associations among its top 20 taxpayers. With total tax revenue accounting
for 23% of total amount of Shanghai
Customs.
Transfer Pricing
Challenges for Customs Valuation
• TCCV and customs authorities focus on TP
• China Customs has not only accumulated
rich experience, but also facing challenges
in respect of Customs control on transfer
pricing
No practical guidance as to transfer
pricing for Customs purposes
• Difficult to formulate a unified practical
guidance
• Circumstances surrounding the sale &
Commentary 23.1 can not meet the need of
Customs authorities
Significant divergences between
transfer pricing and Customs valuation
• A lot in common, but significant divergence
in their application.
• TNMM doesn’t focus on the reasonableness
of expenses
• A low imported price with a high expense
Inappropriate transfer pricing policies are
used to evade customs duty
• Transfer pricing policy with lower tax burden
• Difference between TP practice and TP policy
• Failure to declare subsequent transfer
pricing adjustments
• Manipulation of the arm’s length range
Great Progress of TP study
• WCO-OECD joint hands
• Commentary 23.1
• Case Study on TNMM by USA
• Case Study on RPM by China
Further the studies on TP
• Change the research findings into tools and
instruments as guidance
• Promote the amendment and updating of
WTO Valuation Agreement when appropriate
• Improve mechanism of transfer pricing audit
- registration regime of transfer pricing
-declaration of subsequent TP adjustments
Enhance coordination between
tax and Customs authorities
• A unified management of transfer pricing and
joint audits are expected.
• China Customs plans to carry out a audit of
transfer pricing on selected industries and
enterprises later this year. Sharing
information with China tax authorities
Encourage stronger links and
cooperation with MNEs
• Cooperation between Customs and business
community is a useful basis for creating a
win-win situation in respect of company
compliance and trade facilitation.
• Improve clearance efficiency and enhance
compliance.
THANK YOU