What should be in your transfer pricing focus in Asia
International Tax Review is part of the Delinian Group, Delinian Limited, 4 Bouverie Street, London, EC4Y 8AX, Registered in England & Wales, Company number 00954730
Copyright © Delinian Limited and its affiliated companies 2024

Accessibility | Terms of Use | Privacy Policy | Modern Slavery Statement

What should be in your transfer pricing focus in Asia

fotoflexer-photoasia.jpg

Li Ying is tax director – transfer pricing for North East Asia for Siemens, based in Beijing, and one of the speakers at International Tax Review’s Asia Tax Forum in Singapore in May. Here she talks about the issues that are taking up her time, how transfer pricing in Asia Pacific can be different to the rest of the world and the one change that would make her life easier.


International Tax Review (ITR): Which countries in the part of the Asia Pacific region that you cover are getting your attention at the moment?


Li Ying (LY): I am only responsible for Greater China and Mongolia. Although India is not within my scope, I always keep a keen eye on Indian TP developments. There's no doubt that Indian TP enforcement is distinctive, for example, in the use of the arithmetic mean instead of interquartile range; specific domestic transactions (SDT); and the assessment of marketing intangibles. It's apparent that developing countries, including China,are taking leverage of TP administration experiences from India.


ITR: What are the particular transfer pricing issues  you are having to deal with there?


LY: Intangibles (including royalty) and financial transactions are getting more and more attention. Apart from that, China’s tax authority is also exploring the anti-avoidance of offshore share transfers.

ITR: Transfer pricing compliance is a hot topic worldwide now. Has anything changed in how tax authorities deal with this?


LY: In addition to the information collected through traditional TP compliance channels (for example, TP returns and TP documentation reports), tax authorities are getting their information from other sources, including information exchange with treaty partners, Customs offices and banks where taxpayers get their loans. Moreover, for key taxpayers, the tax authorities follow their financial news on public media and the company's own websites. It is becoming more difficult to hide anything from the tax authorities.


At the same time, the tax authorities are also aware that TP compliance is also a huge burden for themselves in terms of human resources and money. Therefore, they are also keen to develop simplified measures for non-significant transactions by introducing safe harbours, for example.


ITR: Asia Pacific countries such as China and India take a different approach to the OECD on some aspects of transfer pricing. Is this a serious problem for multinationals or just something you have to get used to when doing business?


LY: It's perfectly true that China and India are having their own voices in some aspects of TP practices. As an MNE, we factually feel the pain. It is a serious problem but it is only one of the risks that management balance when making investment decisions to those countries. Sometimes double taxation is the price that an MNE must pay in order to enter a market.


The best way to solve it is to have a BAPA (bilateral advance pricing agreement). However, considering the time cost, financial cost, the risk of divulgence, and the short lifetime of a BAPA in A dynamic economy, some MNEs simply choose to take the double taxation directly.


ITR: Anti-avoidance rules, both statutory and non-statutory, have also become a hot tax topic worldwide recently. Are such rules in this region easy to understand and simple to comply with?


LY: China and India are competing with each other for the most "difficult, ambiguous, and uncertain TP regime in Asia". Comments from practitioners indicate that TP rules are short, obscure and subject to various unpredictable applications across the country. They are definitely hard to understand and difficult to comply with.


ITR: If one change to transfer pricing rules in any part of Asia would help you in your role, what would it be?


LY: Introducing safe harbours for simple functions (like contract manufacturing, routine distributors, and contract R&D service providers) to reduce uncertainties for taxpayers doing business in Asia.

You can find more details about International Tax Review’s Asia Tax Forum, including the agenda and line-up of top speakers, here.

Save $200 by signing up to attend the forum here

more across site & bottom lb ros

More from across our site

Jeremy Brown arrives at the firm after a near 16-year career with Deloitte
PwC could elect a woman into the senior leadership position for the first time; in other news, KPMG Australia has extended its CEO’s term
The Senate report into PwC’s scandal is titled ‘The cover up worsens the crime’
Law firms that are conscious of their role in society are more likely to win work, according to a survey of over 23,000 in-house professionals
The firm’s tax business generated a quarter of HLB’s overall revenues in 2023
While successful pillar two implementation will require collaboration across all units, a combination of internal and external tax advice is at the centre of the effort
Binance has also been accused of manipulating foreign exchange rates via currency speculation and rate-fixing
Six individuals should have raised questions over information they received but did not breach professional standards, according to the firm
The partnership of KPMG UK has installed Holt for a second term as CEO and senior partner; in other news, a Baker McKenzie partner has sued the IRS
HSBC has settled a claim originally worth £240m relating to a failed film tax relief scheme without admitting liability or wrongdoing
Gift this article