Meaning
A technical regulatory decree issued by the national taxation agency mandates the reporting structures and audit frameworks for multinational corporations managing related-party transactions. This regulation, known as State Taxation Administration Announcement 2016 No 64, guides regional tax bureaus in carrying out risk assessments and tax adjustments for non-resident corporate entities. The measure ensures that transfer pricing methods align with international arms-length standards.
Tax administrations use these filings to identify enterprises that shift profits to low-tax jurisdictions.
Disclosure Threshold
Corporations must file annual reporting forms on related-party transactions when their transaction volume exceeds the established legislative limits. In State Taxation Administration Announcement 2016 No 64, the reporting requirements apply to transfer prices of tangible goods, financial transactions, and intangible property transfers. The threshold is calculated based on the cumulative transaction value during the fiscal year.
Transfer Pricing
The national tax administration requires companies to maintain a local file and a master file explaining their pricing strategy and economic rationale. Documenting these internal prices protects the enterprise from unilateral pricing adjustments.
Penalty Risk
Taxpayer non-compliance triggers immediate tax investigations and leads to significant interest surcharges on back taxes. The regulatory authorities share information across borders to audit transfer pricing structures effectively.
