I. China Transfer Pricing for International Taxation
(1) The concept and manifestation of transfer pricing.
In international taxation, transfer pricing generally refers to the internal transaction pricing between members of a company group and the transaction pricing between related parties that do not formally belong to the same company group but have actual interests. The resulting price is called transfer price. Generally speaking, this price may be different from the market price suitable for foreign economic exchanges. Multinational companies often use transfer pricing to coordinate the relationship between their internal units in order to seek overall profits and achieve their global strategic goals. Driven by this interest, the transfer price may greatly deviate from the price that should be reached between unrelated parties engaged in the same or similar transactions under the same or similar conditions in the open market. In practice, transfer pricing has many forms, covering almost all the business activities and achievements of multinational companies. Including: 1, commodity purchase and sale. At present, the transfer pricing problem of foreign-funded enterprises in China mainly focuses on this aspect. The pricing level of commodity internal transaction has opposite influence on both buyers and sellers. Generally, the way of "AG low output" or "low input and high output" is adopted to transfer income and profits from high tax countries to low tax countries or tax havens. 2. provide labor services. Design, maintenance, advertising, scientific research, consulting and other labor activities. Generally involves the receipt and payment of expenses. Compared with commodity trading, the cost elasticity is large and the income is not easy to determine. This kind of capital flow provides convenience for profit distribution among enterprises. 3. Purchase and lease of fixed assets. The level of purchase fee or lease fee directly affects the amount of depreciation expenses extracted by enterprises, and ultimately affects the profit distribution among enterprises. 4. Loan transactions. This kind of capital operation has a more direct impact on profits and is more difficult to grasp. No matter what form it takes, the ultimate goal of transfer pricing activities of multinational companies is to obtain profits. Specific definitions, including tax purposes and non-tax purposes. The main purpose of taxation is to reduce the tax burden. Multinational companies often take advantage of the differences in tax rates and tax rules in different countries to make their entities in high-tax countries lower the sales prices of their related entities in tax countries and lower the standards for the allocation of expenses and expenses; On the other hand, entities in low-tax countries raise the sales price of related entities in high-tax countries, and raise the standard of handling fees and expenses distribution, so as to transfer some profits that should be realized and taxed in high-tax countries to low-tax countries. Part of the tax reduction in high-tax countries is converted into the tax in low-tax countries, and the other part directly increases the after-tax income of the whole company group, thus achieving the purpose of reducing the tax burden. Non-tax purposes are mainly such as entering and controlling a certain market, accelerating cost recovery, seeking more benefits from joint ventures, and avoiding foreign exchange risks.
(B) Transfer pricing leads to the imbalance of international tax benefits. Through transfer pricing, multinational companies can increase or decrease the income and expenses of affiliated enterprises located in relevant countries, and eventually these changes will inevitably lead to the increase or decrease of tax revenue of the host government. When the transfer price increases, the tax revenue of international income transfer countries and international cost transfer countries increases, while the tax revenue of international income transfer countries and international cost transfer countries decreases. When the transfer price is depressed, the situation is just the opposite. It is embodied in the following four aspects: first, the distribution relationship between transnational affiliated enterprises; The second is the distribution relationship between one enterprise and its host country's tax * in transnational affiliated enterprise transactions; The third is the distribution relationship between the other enterprise and the tax * of the country where it is located; The fourth is the distribution relationship of tax revenue in the countries where both parties to the transnational affiliated enterprise transaction are located. The distribution of these four aspects is intertwined, which leads to the conflict between different interests and makes the income distribution relationship between transnational affiliated enterprises more complicated. In the transfer pricing of the same transaction between transnational affiliated enterprises, the transfer-in country and the transfer-out country are often in opposite positions, while the tax department of a country often only pays attention to the "underpayment" of its own enterprises.
Second, measures to prevent transfer pricing in China need to be strengthened.
Since the reform and opening up, more and more multinational companies have set up enterprises in China, which not only bring advanced technology, management experience and construction funds to China, but also put forward the problem of how to prevent multinational companies from using transfer pricing to avoid taxes. Generally speaking, China's tax authorities are still in the exploratory stage, both in theory and practice, and there are many loopholes in all aspects.
(A) the transfer pricing tax system is not perfect
First of all, the regulations are too abstract, simple and scattered, which affects the operability. The Detailed Rules for the Implementation of the Income Tax Law for Enterprises with Foreign Investment and Foreign Enterprises stipulates four adjustment methods of transfer pricing, and strictly stipulates the use order of each method, which limits the flexibility of operation; Article 2 of "Regulations on Tax Administration of Business Transactions between Associated Enterprises" formulated by People's Republic of China (PRC) State Taxation Administration of The People's Republic of China 1998 stipulates that "if the amount of taxable income or taxable income is reduced by not collecting or paying the price and expenses according to the business transactions between independent enterprises, the tax authorities shall investigate, review and implement tax adjustment according to law." These provisions are too general and broad; There is no corresponding adjustment measure for turnover tax that will be involved at the same time when adjusting income. In addition, the provisions of transfer pricing tax system on labor tax avoidance and intangible assets transfer are not detailed enough. All the above defects affect its operability. Secondly, the scope of application is small. All the anti-tax avoidance clauses are not enough or basically do not involve tax avoidance between domestic foreign-invested enterprises or affiliated enterprises. Finally, for the transfer pricing tax avoidance behavior that has become a fact, it only stipulates that profits should be readjusted, and there is no corresponding penalty clause, which undoubtedly gives enterprises the opportunity to take advantage of loopholes and does not constitute the necessary deterrent and stop mechanism in law.
(2) It is difficult to quickly grasp the international market price.
On the one hand, tax authorities need to provide relevant information, on the other hand, they need to master well-informed international market price information to monitor the income and expenditure distribution of affiliated enterprises. Judging from the current situation in China, there is no specialized information institution in the collection, collation, storage and transmission of tax information such as international commodity and service prices, and there is no complete and efficient anti-tax avoidance information system, so it is impossible to effectively manage the income and expenditure of affiliated enterprises.
(C) the lack of high-quality foreign tax team
At present, most people engaged in foreign-related tax work in China lack international tax knowledge and experience in dealing with tax avoidance, and their computer and foreign language skills are generally low, which limits the effective development of inspection work. At the same time, the lack of personnel and institutions specializing in transfer pricing in China is not conducive to accumulating experience and training teams.
Thirdly, some successful measures to prevent transfer pricing in the world.
(1) Strengthen the international tax declaration system. Some countries require multinational taxpayers to fill in a specific form to declare transfer pricing to the tax bureau. For example, in the United States, Canada and Australia, in addition to the general declaration, special reports should be written to explain the business overview related to transfer pricing. Some countries also require multinational taxpayers to bear the burden of proof for foreign-related facts related to tax cases.
(2) Strengthen the accounting review system. First, improve the management requirements of reconciliation documents. At present, many countries stipulate that the tax statements of companies and enterprises, especially joint-stock limited enterprises, must be audited by relevant certified public accountants. In addition, some countries require multinational taxpayers to provide general accounting information needed for pricing investigation, and also require the transfer of specific accounting information for pricing business. Secondly, the implementation of the assessment income tax system. Many countries have adopted the system of income tax assessment for taxpayers who can't provide accurate proof of costs and expenses or earn a small amount of income every year.
Fourth, strengthen the prevention of transfer pricing.
(A) to further improve the transfer pricing tax system
1. Expand the application scope of transfer pricing tax system, that is, expand the adjustment scope of transfer pricing between foreign-invested enterprises and domestic affiliated enterprises, not just between domestic foreign-funded enterprises and their overseas affiliated enterprises. 2. Enhance the operability of transfer pricing adjustment. At present, the adjustment methods stipulated in China are diverse and difficult to determine, and the order of use of adjustment methods is mechanically stipulated. Therefore, we should abandon the priority order of various methods stipulated by machinery, adopt flexible and practical principles to determine the adjustment methods, and make clear provisions on intangible assets and intra-group services respectively. 3. Clarify taxpayers' reporting obligations and burden of proof. Our country should make taxpayers' declaration obligations systematic and standardized by making various tax returns. When the tax authorities initially confirm that taxpayers have transfer pricing behavior, taxpayers should bear the responsibility of collecting information and proving their innocence to the tax authorities. At the same time, it should also be clearly stated that the transfer pricing adjustment conforms to the normal trading principle. 4. Impose lighter taxes and heavier penalties on tax evasion by using transfer pricing.
(two) to establish a smooth international market price information channels.
First, make full use of computer networks, establish foreign-related information centers, establish information sharing with some relevant departments, and broaden information exchange channels. Second, special personnel and institutions should be set up to be responsible for the collection, collation and exchange of foreign-related tax information. Third, establish and strengthen cooperation with foreign tax collection and management departments and institutions, continue to actively sign bilateral or multilateral tax agreements with other countries, sign anti-tax avoidance measures with tax information exchange provisions, and do a good job in international cooperation and exchanges.
(3) Implementing an advance pricing system.
The essence of the advance pricing system is to adjust the after-the-fact audit to the prior negotiation, that is, to determine a set of appropriate standards, adjustments and important assumptions for the transfer pricing of the transaction in a certain period before the controlled transaction occurs. Including multinational taxpayers and at least one government tax department. The implementation of advance pricing is conducive to eliminating disputes and a lot of cumbersome matters between the two parties, and at the same time can avoid the trouble of adjusting accounts and withdrawing funds brought about by later adjustment. The United States, Canada and other countries have begun to implement the advance pricing system and have some experience. On the basis of summarizing the practice of relevant countries, OECD has formulated a highly operational guide to advance pricing arrangements. China should also learn from the experience of other countries and formulate a feasible advance pricing system on the existing basis.