Meaning
Structured collection of documents compiled at the time of a transaction to prove that intercompany dealings align with arm’s length principles. Tax authorities in China require the contemporaneous execution dossier to substantiate that service fees or royalty payments are genuine and priced fairly. It acts as the primary defense during a transfer pricing audit by providing a real-time record of the economic rationale behind a business decision.
Mandatory Archive
Keeping records current ensures that the taxpayer can meet the tight deadlines for submission upon request. The contemporaneous execution dossier includes contracts and proof of service delivery performed before the transaction occurred. Failure to maintain these records results in the loss of the right to claim tax treaty benefits or expense deductions.
Evidentiary Chain
Verification of service performance relies on emails, meeting minutes and project deliverables stored within the file. For a manufacturing plant, the contemporaneous execution dossier must contain specific logs showing how technical support from a foreign parent improved local production yields or reduced waste in the assembly line. This chronological record provides the causal link between the payment made and the value received by the entity in the local jurisdiction.
Compliance Threshold
Statutory requirements mandate that these files be updated annually for substantial related-party transactions. While the contemporaneous execution dossier is not always submitted proactively, it must be available for inspection within twenty days of a formal notice from the State Taxation Administration. Proper maintenance of this file reduces the risk of penalties related to transfer pricing adjustments.
