A joint administrative procedure in China coordinates the audit activities of the tax and customs authorities to evaluate the transfer pricing and customs valuation of transactions between related parties. This cooperative initiative, known as the joint tax customs collaborative evaluation, addresses the historical conflict where customs seeks a higher import value to maximize duties while tax bureaus seek a lower value to increase corporate income tax. By sharing transaction data, audit findings, and risk assessments, the two authorities work together to establish a single, agreed-upon valuation for imported goods and services.
This unified evaluation reduces the administrative burden on both the state and the importing enterprise by preventing double taxation and conflicting valuation decisions. To participate in this process, the enterprise must submit a formal application, together with detailed transfer pricing studies, commercial contracts, and financial records. This collaborative approach provides a transparent path for multinational companies to align their trade compliance with their local tax obligations.
The coordination between the State Taxation Administration and the General Administration of Customs is driven by the need for consistent enforcement of transfer pricing rules and customs valuation standards. Historically, these two departments operated independently, often forcing importing companies to navigate conflicting requirements and defend the same transaction from opposite perspectives. Through the joint tax customs collaborative evaluation, the authorities have established a shared database and a joint working group to conduct concurrent reviews of high-risk transactions.
This institutional alignment allows the agencies to leverage their respective strengths, with customs focusing on the transaction-by-transaction value and tax focusing on the overall profitability of the enterprise. The resulting joint determination is binding on both authorities, providing the importing company with legal certainty and protecting it from separate, contradictory audits by either agency.
The procedural workflow begins when an importing enterprise or the authorities identify a significant valuation risk in the company’s related-party imports. The enterprise can proactively apply for the evaluation, or the agencies can select the company for a joint audit based on their coordinated risk-analysis systems. Once initiated, the joint tax customs collaborative evaluation involves a detailed analysis of the company’s transfer pricing methodology, including the selection of comparable transactions and the calculation of profit margins.
The joint team conducts on-site inspections, interviews local management, and reviews the financial accounts of both the local subsidiary and its foreign parent. Based on this comprehensive review, the joint team determines whether the transfer prices align with the arm’s length principle and the customs valuation rules. The evaluation concludes with a formal agreement or determination that establishes the approved valuation basis for the company’s future imports.
For multinational corporations, the primary advantage of this collaborative evaluation is the reduction of tax uncertainty and the prevention of costly disputes with multiple regulatory bodies. A successful joint tax customs collaborative evaluation provides a stable, predictable framework for pricing imports, allowing the enterprise to plan its supply chain costs and tax liabilities with confidence. It eliminates the risk of being caught in a loop where adjusting the import price to satisfy one authority triggers an audit or penalty from the other.
Furthermore, participating in this program enhances the company’s compliance rating with both the tax and customs administrations, leading to lower audit frequencies and faster clearance times. This cooperative mechanism represents a modern administrative practice that balances the revenue-protection goals of the state with the operational needs of international businesses.
Reconciling Chinese customs valuation and transfer pricing adjustments demands pre-import price definitions, explicit contract clauses, and joint advance rulings.
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