Baker McKenzie FenXun Tax Director Abe Zhao Discusses Transfer Pricing Audits in China and Rising Scrutiny of Intercompany Transactions

Abe Zhao, Senior Tax Consulting Director at Baker McKenzie FenXun, authored an article published in the International Tax Review. In the article, Abe analyzed a recent case involving a High and New Technology Enterprise (HNTE) and examined how China’s tax authorities have heightened their scrutiny of intercompany transactions through transfer pricing (TP) audits.

This case highlights several trends in the current landscape of Chinese TP investigations:

• Increasing reliance on self-inspection procedures, requiring taxpayers to conduct a self-inspection and submit a comprehensive report detailing findings and proposed adjustments.
• Rising scrutiny of outbound payments associated with IP ownership and licensing arrangements.
• Growing emphasis on individual intercompany transactions rather than relying solely on overall profitability assessments.
• The importance of maintaining clear and comprehensive documentation for service deliverables.

Subscribers can read the full article here: TP audits in China: a case study and emerging trends | International Tax Review