Learning to share in China

Transfer pricing activity in China is increasingly apparent and news about regulation changes, documentation requirements and litigation is being reported in far greater volume.

One of the issues multinationals face is cost sharing arrangements (CSA). The idea of transferring IP to China is not always attractive to major companies, despite China's incentive of high prices in return.

What is the biggest TP issue affecting Siemens?

The disputes with tax authorities both domestically and in a cross-border context.

For example, we have an internal project to allocate profit according to function and risk profile of an entity. In the context of a limited risk manufacturer, only routine profit is expected, for example 5% (the actual profit target depends on different industries). However, the State Administration of Taxation (SAT), with the intention to grab a larger slice of the global profits, apply various concepts including location saving, marketing intangibles and market premium...