When China enterprises conduct transnational operations, it is important to follow the international laws and practices of transnational operations, obtain higher profits in the world market than in the domestic market according to the principles of market economy, and realize "profit maximization". Therefore, it is a realistic choice for China multinational companies to learn from the management methods of western multinational companies and use the transfer pricing strategy.
First of all, the implementation of transfer pricing strategy is a realistic choice for multinational enterprises in China.
Since the reform and opening up 20 years ago, China's overseas investment enterprises have set up more than 6,000 trade and non-trade enterprises in more than 60 countries and regions around the world, with the agreed investment exceeding10 billion US dollars, of which the Chinese investment reached 6.7 billion US dollars. This shows that a number of enterprises in China have moved from domestic operation to international operation.
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Business transformation. These enterprises have accumulated rich experience in the practice of transnational operation, but there are also many problems to be further solved. Therefore, it should be one of the important business strategies of China multinational companies to actively learn from the business methods of western multinational companies and combine the actual situation of China enterprises to make full use of transfer pricing to achieve the goal of "profit maximization".
(A) the meaning of transfer pricing
Transfer pricing, also known as transfer pricing or transfer pricing, is a business strategy of multinational companies. Refers to the internal transaction prices agreed between the parent company and its subsidiaries and between subsidiaries when exporting and purchasing goods, services and technologies. This pricing is subject to the global strategic objectives of multinational companies.
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Standards and the need to seek maximum profit. Multinational companies adjust the cost of their subsidiaries' products and transfer their profits by transferring prices in various names, so as to minimize tax payment and maximize the profits of the whole company on a global scale, reduce various political and economic risks and support their subsidiaries to compete for the market. Therefore, this pricing is largely unaffected by the law of market supply and demand, and it is not the price determined by independent buyers and sellers in the open market according to the principle of "independent competition", but an artificial internal transfer price.
(B) China multinational enterprises to implement the strategic objectives of the transfer pricing strategy
Transfer pricing is the main means for enterprises to achieve global strategic goals. Multinational enterprises in China can achieve the following goals by implementing the transfer pricing strategy:
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1. tax avoidance, to minimize the tax payment of the whole company.
Transfer pricing was first used to avoid income tax. The subsidiaries of multinational companies are located in different countries, and the income tax rates in these countries are different. Multinational companies can take advantage of this to transfer profits from high-tax countries to low-tax countries (including three types of countries belonging to tax havens) and reduce the overall tax payment of the company. At present, except Hongkong and Macau, China's overseas enterprises are mostly concentrated in developed countries and regions such as the United States, Japan, Canada and the European Union. These countries and regions have less preferential treatment for foreign investment and often have higher income tax. Therefore, multinational companies investing in these countries and regions should especially learn to use transfer pricing strategy to reduce corporate tax burden.
Transfer pricing can also be used to avoid tariffs. There are two specific ways: one is to reduce the price between enterprises within multinational companies.
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Price transaction, reduce the base of paying customs duties. The other is to use the preferential terms of regional customs union or related agreements to evade tariffs. For example, the European Free Trade Area stipulates that if goods are produced outside the free trade area, customs duties must be paid when the goods are transported from one member country to another. However, if more than 50% of the value of goods is added within the territory of the member countries of the free trade zone, the distribution in the free trade zone can be exempted from customs duties. Therefore, if a multinational company in China wants to transport a batch of semi-finished products to its subsidiary in Sweden and sell them in the trade zone after making them into finished products, it can lower the transfer pricing and artificially lower the sales price of semi-finished products, so that more than 50% of the value of finished products made in Sweden can be added in Sweden, so that goods can be exempted from paying customs duties when being transported to other members of the free trade zone.
2. Adjust the profit level of subsidiaries.
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Using transfer pricing to adjust the profit level of subsidiaries is mainly to reduce profits, so as to avoid a series of troubles caused by excessive profits of subsidiaries, mainly including: (1) Some host governments may request to renegotiate the entry conditions of multinational companies and share their benefits. In order to avoid renegotiation, multinational enterprises in China can quietly transfer the profits of these countries or regions through transfer pricing, and only announce the lower corporate profits. (2) In the joint venture between multinational companies and local companies, if the investment ratio of multinational companies is relatively large, it is generally hoped to expand the assets of the joint venture and reduce the announced profits, thus reducing the losses caused by paying income tax and dividends; If the joint venture of the host country accounts for a large proportion of the investment, the multinational company will get less profits according to the principle of sharing dividends in proportion to the investment. Multinational companies don't want the joint venture of the host country to pay more dividends, so they don't want to leave more profits in the joint venture. transport
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The transfer pricing strategy can reduce the total income and profit level of the joint venture and achieve the above objectives. (3) Using transfer pricing to reduce profits can ease the relationship with the host country's trade unions. If an overseas subsidiary announces higher profits, sometimes the trade union in the host country will represent the interests of workers and demand that * * * enjoy profits and increase wages and benefits. Multinational enterprises in China can use transfer pricing to reduce the profit level of their subsidiaries in these countries or regions from their own interests and avoid falling into business crisis.
Sometimes multinational companies can also use transfer pricing to improve the profit level of their subsidiaries. In order to support the establishment and development of foreign subsidiaries, the parent company can use transfer pricing to sell goods and services to its subsidiaries at low prices and buy goods from them at high prices, which will help the subsidiaries to show higher profit margins.
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In order to improve the credit level, it is easy to issue stocks, bonds or seek credit in the local market.
3. Avoid all kinds of risks
(1) Avoid foreign exchange risks. Since the Asian financial crisis, the fluctuation of exchange rate has been very unfavorable for multinational companies to engage in international business activities, and they will suffer losses if they are not handled properly. In order to avoid the losses caused by exchange rate fluctuations, multinational enterprises in China can resort to transfer pricing and "advance or postpone" payment, so as to reduce the losses caused by currency depreciation and even gain the benefits of exchange rate differences.
(2) Evade the price control of the host country. In order to limit and manage the local business activities of multinational companies, some host governments mainly implement market price control policies in two ways: one is anti-dumping and the other is price ceiling.
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China's multinational enterprises are mostly concentrated in developed countries and face many restrictions in this respect. They should take transfer pricing as a countermeasure to avoid price restrictions. When the host country restricts Chinese overseas enterprises from selling in the local market at "dumping" prices, the parent company can adopt the strategy of reducing transfer pricing and provide raw materials, spare parts and so on. By selling to subsidiaries at low prices, subsidiaries can still sell goods at low prices in the local market and beat their competitors, thus controlling the local market. On the other hand, when the host country restricts the high-priced sales of overseas enterprises in China, the parent company can increase the cost of its subsidiaries' products by raising transfer pricing, and the whole company can still get higher profits as a result.
(3) Evade the host country's foreign exchange control, recover investment and income, and allocate funds. China multinational enterprises investing and operating in developing countries and regions often encounter foreign exchange control in the host country.
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Systematic risk and capital control. At present, many governments have made many restrictive regulations on the internal capital distribution of foreign-funded enterprises, especially the remittance of foreign capital and profits, which has brought many inconveniences to the transnational operation of Chinese enterprises. In this case, the profits of subsidiaries in this country can be reduced through transfer pricing, and a considerable part of the profits can be transferred to the parent company or other overseas subsidiaries as prices. Or reduce local direct investment, provide funds to subsidiaries in the form of loans, and charge high interest, so as to repatriate capital in a short time, because generally speaking, foreign exchange control in various countries does not restrict the remittance of loans and interest.
4. Competing for and controlling the market
When subsidiaries need to expand into new markets or face fierce market competition, our parent company can sell them to subsidiaries at low prices.
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Supply raw materials, spare parts or finished products, reduce the production cost of subsidiaries, make them have price advantages, beat some competitors, and compete for and control the market.
Second, the specific practices of multinational enterprises to implement transfer pricing
The formulation process of transfer pricing is a very confidential and complicated work. There are two main commodities subject to transfer pricing.
Class, a tangible commodity, an intangible commodity. In the process of pricing, multinational companies in various countries adopt different transfer pricing methods for different types of goods.
There are usually two pricing systems for tangible goods transfer pricing. One is the pricing system of internal cost plus increased (or decreased) transfer price; The other is the pricing system of external market price plus upward (or downward) transfer price.
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Because the price comparability of intangible goods is poor and there is no reliable pricing basis, the pricing of intangible goods mainly depends on two factors, one is the mastery of information, and the other is the bargaining power in negotiation.
The specific methods of transfer pricing strategy of multinational enterprises are as follows: (1) The cost of subsidiaries is affected by controlling the transaction prices of intermediate products such as parts and semi-finished products. (2) By controlling the selling price or service life of fixed assets of overseas subsidiaries, the cost of subsidiaries will be affected. (3) By providing loans and interest, the cost of subsidiaries will be affected. (4) The cost and profit of subsidiaries will be affected by the royalty level of intangible assets such as patents, know-how, trademarks and manufacturers' names. (5) Using labor costs such as technology, management, advertising and consulting to influence the cost of overseas companies.
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And profits. (6) Giving overseas companies higher or lower commissions and kickbacks through product sales, or charging subsidiaries higher or lower transportation, loading and unloading and insurance fees by using the transportation system and insurance system controlled by the parent company, thus affecting the costs and profits of overseas companies.
Three, China's multinational enterprises to implement transfer pricing constraints and countermeasures
1. External factors: the anti-tax avoidance laws and regulations of the host government and the constraints of tax systems of various countries.
At present, all countries regard transfer pricing for tax avoidance as the primary goal of anti-tax avoidance. Many developed countries have formulated special anti-tax avoidance laws and regulations, and many countries also have special provisions on anti-tax avoidance in their domestic tax laws or foreign-related tax laws, which undoubtedly gives our multinational enterprises the opportunity to transfer pricing.
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The price brings great difficulties. This requires us to seriously study and analyze the transfer pricing tax system in these countries and regions, find out the shortcomings and seek space. In fact, in many countries and regions, the international balance of payments distribution standard in transfer pricing tax system is reasonable in theory, but not feasible in practice. Furthermore, although countries generally implement the transfer pricing tax system, in order to attract foreign investment, increase employment and develop their own economies, the provisions and specific implementation of the transfer pricing tax system are often inconsistent.
At the same time, there are some constraints in the tax systems of various countries. For example, (1) If the tax systems of the countries where overseas subsidiaries are located are not different or the differences are very small, the tax incentives for multinational enterprises in China to implement transfer pricing are very small. (2) If the requirements of different tax authorities (tariff and income tax) in a country are inconsistent, transfer pricing will affect import tax and income tax.
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The direction of influence is often just the opposite, and paying less import tax is Dona income tax. Therefore, as a transnational tax, China's multinational enterprises have to weigh carefully to avoid paying attention to one thing and losing another. (3) When the countries where overseas companies are located are not in harmony for their own interests, transfer pricing will be threatened by double taxation. By the end of 1999, China has formally signed double taxation avoidance agreements with 6 1 countries, accounting for about 39% of the countries and regions with trade and investment, but the remaining 6 1% countries and regions have not signed such agreements, which is not conducive to the transnational business activities of Chinese enterprises. As a local legal person in the host country, multinational enterprises in China are prone to friction and bear double tax burden, which is related to implementation.
At present, China's overseas investment has spread all over the world 160 countries and regions, so our multinational enterprises should carefully study and divide it.
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Analyze the anti-tax avoidance laws and regulations of the host government and the tax systems of various countries, and adjust the transfer pricing strategy according to different situations.
2. Internal constraints
(1) Conflict of interest. The parent company wants to set high transfer pricing for products and services, while overseas subsidiaries want low transfer pricing, both of which are based on their own profits. In the case of joint venture of overseas subsidiaries, it may be difficult for other shareholders to accept that the parent company absorbs the profits of the subsidiaries at will.
(2) Competitive contradiction. From the strategic goal of transfer pricing, transfer pricing is a means to enhance the competitiveness of overseas subsidiaries, but at the same time, its possible negative effects can not be ignored. Because, on the one hand,
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The implementation of transfer pricing absorbs the profits of overseas enterprises, which in itself reduces the competitiveness of enterprises; On the other hand, for another affiliated enterprise that has turned into profit, it strengthened its competitiveness at that time or in the short term, but this kind of support and subsidy is not conducive to the enterprise to participate in the competition and improve its competitiveness in the long run.
(3) Management dilemma. As mentioned above, the overseas subsidiaries supported by long-term profit subsidies will hinder their effective management, and the long-term "book" losses of profit-transferring enterprises are also not conducive to effective management and the realization of the strategic goal of maximizing the overall profits of multinational enterprises. Shareholders' expectations of the enterprise, managers' enthusiasm and workers' enthusiasm will be damaged and consumed by long-term false operation, which will bring immeasurable potential losses to multinational enterprises, far exceeding the temporary benefits obtained by transfer pricing.
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