Corporate taxation

The corporate tax rate in China is 25%. The Enterprise Income Tax Law provides a reduced tax rate of 15% for high and new technology enterprises. The reduced tax rate of 15% is also applied to qualified technologically advanced service enterprises established in certain cities until December 31, 2018 (until December, 2017 for some cities). Also, enterprises operating in certain regions are eligible for a 15% corporate tax rate until December 31, 2020. Moreover, effective tax rate of 10% is granted to small-size and low-profit enterprises until December 31, 2017.

Transfer pricing

Transfer pricing provisions in China is generally consistent with the OECD Guidelines and has developed rapidly over the past few years. The CIT law provides the arm’s-length principle as the guiding principle for related party transactions and empowers the tax authorities in China to adjust a taxpayer’s taxable income if it fails to comply with the arm’s-length principle in its dealings with related parties. Articles relevant to transfer pricing are found mainly in Chapter 6, ‘Special Tax Adjustment’. As of 29 June 2016, there are two SAT releases that form the overall framework for transfer pricing enforcement in China: (1) Bulletin Gonggao [2016] No. 42 (Bulletin 42) – Bulletin on Improving Administration of Related-party Transaction Reporting and Contemporaneous Documentation and (2) SAT Public Notice [2017] No. 6 – Administrative Measures of Special Tax Investigation and Adjustment and Mutual Agreement Procedure.


Transfer Pricing Case Law

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