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China: How China has developed its transfer pricing rules

23 March 2011

Cheng Chi, Irene Yan, Leonard Zhang and Ho-Yin Leung of KPMG describe a transfer pricing system in China that is getting more sophisticated and international

Circular Guoshuifa [2009] No 2, "The Implementation Measures of Special Taxation Adjustments (Provisional)" was enforced for the second consecutive year in China in 2010. As background, China has revamped its transfer pricing regime since 2008, after the promulgation of its new corporate income tax law (CIT Law). Changes and improvements to the regime were introduced in circular 2 by the State Administration of Taxation (SAT) in January 2009. This circular together with the new CIT Law became retroactively effective on January 1 2008. Transfer pricing regulations in China are considered to be comprehensive and one of the most extensive and demanding in the world, particularly in relation to contemporaneous documentation requirements.

In 2010, a number of important transfer pricing developments took place in China.

SAT's recent development The SAT has been strengthening its workforce for transfer pricing related cases. In early 2010, about 100 transfer pricing specialists were employed across the...



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