Advance Pricing Arrangements
An Advance Pricing Arrangements (APA) is an advance agreement between the taxpayer and the authorities as to the appropriate pricing methodology to be utilized by the taxpayer. China’s transfer pricing rules allow for APAs. APA’s enable taxpayers to greatly reduce their transfer pricing risk and the threat of future challenges by the authorities. The Advance Pricing Arrangement (“APA”) represents a change in philosophy as well as a method of international taxation administration. The APA mechanism can be an effective tool for resolving transfer pricing issues and minimizing the potential for a transfer pricing dispute through collaboration between taxpayers and tax authorities. It helps to improve mutual understanding and strengthen collaboration between enterprises and tax authorities. It reduces administration costs for the tax authority and compliance costs for the taxpayer, as well as providing increased Foreword China APA Annual Report (2009) certainty regarding enterprises’ tax burdens and tax authorities’ revenues, to the benefit of both parties.
Our professionals can help you to prepare your APA and liaise with the authorities to ensure a mutually agreeable position. We can also help you to determine whether the APA appropriate for your company. The type of information that must be disclosed when arranging an APA means that they will not always be suitable for all clients.