May 2017 - SAT Integrating BEPS Action Plans 8 to 10 and Action Plan 14
On 17 March 2017, the State Administration of Taxation (“SAT”) released its long-awaited Bulletin on Special Tax Investigations, Adjustments and Mutual Agreement Procedures (“Bulletin 6”), thus largely completing the revision of the transfer pricing specific clauses of the old Circular 2 concerning Special Tax Adjustments.
In response to the OECD Action Plans 8 to 10, 13 and 14, the SAT initially issued a Discussion Draft in May 2015 (“Discussion Draft”) for public consultation. The Discussion Draft was subsequently withdrawn, with the introduction of Bulletin 421 dealing with OECD Action Plan 13 in July 2016, and an indication that further announcements would be made in the future. Bulletin 64 dealing with Advanced Pricing Arrangement was subsequently issued in October 2016.
Finally, the SAT clarifies certain key transfer pricing issues, as well as the methodology and procedures for special tax audits and adjustments in Bulletin 6. In clarifying the technical positions, Bulletin 6 incorporates changes arising from the OECD’s Base Erosion and Profit Shifting (“BEPS”) Action Plans 8 to 10 and Action Plan 14. Corresponding sections in the old Circular 2 are repealed because of the issuance of this Bulletin 6 which comes into effect from 1 May 2017.
In making the changes, the SAT has generally incorporated positions taken in the Discussion Draft regarding intangible assets, related party services and the monitoring of profit levels, as well as the guidance around mutual agreement procedures.
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