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  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
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