Revisiting Transfer Pricing in China: a Year of New Regulations

2016 has seen the release of new laws that have revamped transfer pricing compliance for MNCs in China. If implemented early in a Chinese entity’s business life, a transfer pricing system can complement and support an MNC’s business model and commercial objectives, as well as optimize its global effective tax rate. Non-compliance with China’s new transfer pricing laws, however, can result in heavy penalties for an MNC, and subsequently eat into its bottom line. In this issue of China Briefing, we provide a guide to navigating China’s latest regulations, highlighting the main issues that exist for foreign companies, and explaining the various transfer pricing methods and processes that exist.