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Announcement of State Taxation Administration on Matters Relating to Application of Summary Procedur2021-07-26 17:18:09

Announcement of State Taxation Administration on Matters Relating to Application of Summary Procedures for Unilateral Advance Pricing Arrangements

State Taxation Administration Announcement [2021] No. 24


For the purposes of implementing the Opinions on Further Intensifying the Reform of Administration of Tax Collection promulgated by the General Office of the CPC Central Committee and the General Office of the State Council, deepening the reform of "streamlining administration, initiating decentralizing while improving regulation and upgrading services, optimising the business environment, promoting cooperation between tax authorities and enterprises, and improving personalised services for cross-border investors and tax certainty, pursuant to the relevant provisions of the Corporate Income Tax Law of the People's Republic of China and its implementing regulations, the Law of the People's Republic of China on the Administration of Tax Collection and its implementing rules, announcement is hereby made on matters relating to application of summary procedures for unilateral advance pricing arrangements as follows:


I. In applying for unilateral advance pricing arrangements pursuant to the relevant provisions of the Announcement of State Taxation Administration on Matters Relating to Improvements to Administration of Advance Pricing Arrangements (Announcement [2016] No. 64, hereinafter referred to as the "Announcement No. 64"), if an enterprise satisfies the requirements of this Announcement, the summary procedures may apply.


II. Summary procedures comprise three phases, namely application for evaluation, negotiation and execution and monitoring of enforcement.


III. Where the amount of related party transactions of an enterprise in each year exceeds CNY 40 million during the three-year period preceding the tax year in which the "Notice on Tax Matter" is served on an enterprise by the tax authorities in charge, and the enterprise satisfies any of the following criteria, the enterprise may apply for application of summary procedures.


(I) the enterprise has provided contemporaneous documentation which complies with the provisions of the Announcement of State Taxation Administration on Matters Relating to Improvements to Administration of Related Party Declarations and Contemporaneous Documentation (Announcement [2016] No. 42) to the tax authorities in charge for the three tax years preceding the proposed year of application;


(II) the enterprise has implemented an advance pricing arrangement during the 10-year period preceding the tax year in which the enterprise submits the application, and the implementation outcome complies with the requirements of the arrangement; or


(III) the enterprise has been subject to the investigation for special tax adjustment by the tax authorities during the 10-year period preceding the tax year in which the enterprise submits the application, and the case is closed.


IV. An enterprise shall submit an application for application of summary procedures to the tax authorities in charge, and the tax authorities in charge shall analyse and evaluate the application and decide on acceptance or non-acceptance.


(I) Where the enterprise has application intent, it shall submit an "Application Form for Summary Procedures for Unilateral Advance Pricing Arrangements" (Appendix) to the tax authorities in charge and attach an application report. The application report shall include the following contents:


1. the related parties and related party transactions involved in the unilateral advance pricing arrangement;


2. the applicable years for the unilateral advance pricing arrangement;


3. whether the unilateral advance pricing arrangement will apply retrospectively to preceding years;


4. the organisation structure and management structure of the enterprise and the group to which it is affiliated;


5. the manufacturing and business information, financial accounting reports, audit reports, contemporaneous documentation etc. of the enterprise for the past three to five tax years;


6. explanation on the functions and risks of various related parties involved in the unilateral advance pricing arrangement, including the departments, staff, expenses, assets etc. on which the division of functions and risks is based;


7. the pricing principle and computation method adopted by the unilateral advance pricing arrangement, as well as the analysis of functions and risks, comparability analysis and assumptions etc. which support the said pricing principle and computation method;


8. value chain or supply chain analysis, as well as considerations for geographical and special advantages such as cost savings, market premium etc.;


9. explanation on market conditions, including industry development trends and competition environment etc.;


10. annual scale of business, business efficiency forecast and business planning etc. during the applicable period for the unilateral advance pricing arrangement;


11. the relevant laws and regulations on domestic and overseas industries which have an impact on the unilateral advance pricing arrangement;


12. the relevant information in compliance with Article 3 of this Announcement; abd


13. any other circumstances which require explanation.


(II) Under any of the following circumstances, the tax authorities in charge shall not accept the application submitted by an enterprise:


1. the tax authorities have implemented case investigation for special tax adjustment or other tax-related case investigation on the enterprise, and the case is pending conclusion;


2. failure to fill in an annual report on related party transactions pursuant to the relevant provisions, and to make correction promptly;


3. failure to prepare, retain and provide contemporaneous documentation pursuant to the relevant provisions;


4. failure to provide the relevant materials pursuant to the requirements of this Announcement, or the materials provided do not satisfy the requirements of the tax authorities, and failure to make supplementation or correction promptly; or


5. refusal to cooperate with the tax authorities in onsite interview for functions and risks.


(III) Upon receipt of an application from an enterprise, the tax authorities in charge shall conduct analysis and evaluation, conduct onsite interview for functions and risks, and serve a "Notice on Tax Matter" on the enterprise within 90 days from receipt of the application, to notify the enterprise of acceptance or non-acceptance of the application; where the application is not accepted, the reason shall be stated.


V. Upon acceptance of an application from an enterprise, the tax authorities in charge shall negotiate with the enterprise on whether the enterprise's related party transactions comply with the arm's length principle, and complete negotiation within six months from service of a "Notice on Tax Matter" on acceptance of application on the enterprise. During the negotiation period, the tax authorities in charge may require the enterprise to submit the relevant supplementary materials, the period for the enterprise to submit the supplementary materials will not be included in the aforesaid six-month period.


(I) Where the tax authorities in charge and the enterprise reach a consensus upon negotiation, the text of the unilateral advance pricing arrangement shall be drafted. The legal representatives of both parties or the representatives authorised by the legal representatives of both parties shall execute the unilateral advance pricing arrangement.


(II) Where the tax authorities in charge cannot reach a consensus with the enterprise upon negotiation, the tax authorities in charge shall serve a "Notice on Tax Matter" on the enterprise for termination of summary procedures. The enterprise may, pursuant to the provisions of Announcement No. 64, re-apply for a unilateral advance pricing arrangement. Materials which have been submitted need not be submitted repetitively.


VI. The tax authorities shall, pursuant to the requirements of Announcement No. 64, carry out proper monitoring and implementation of unilateral advance pricing arrangements.


During the implementation period for a unilateral advance pricing arrangement, where there are substantive changes to the enterprise which have an impact on the unilateral advance pricing arrangement, resulting in termination of implementation of such arrangement, the enterprise may re-apply for a unilateral advance pricing arrangement pursuant to the provisions of this Announcement.


VII. Unilateral advance pricing arrangements shall apply to related party transactions in the period of three to five years from the tax year following the date of service of the "Notice on Tax Matter" on the enterprise by the tax authorities in charge for acceptance of application.


VIII. Where a unilateral advance pricing arrangement involves two or more tax authorities of provinces, autonomous regions, centrally administered municipalities and municipalities with unilateral planning at the same time, the summary procedures shall not apply for the time being.


IX. Other unilateral advance pricing arrangement matters which are not specifically stipulated herein shall be handled pursuant to the provisions of Announcement No. 64.


X. This Announcement shall come into force on 1 September 2021.



State Taxation Administration

July 26, 2021