As a member of the G20, China has expressed its strong support to Base Erosion and Profit Shifting (“BEPS”) Action Plans being studied by the OECD, the final report of which was issued on 5 October 2015, and has been deeply involved in the BEPS development process. It has been expected that the BEPS project would have a significant influence on the work of China’s State Administration of Taxation (“SAT”) in particular the issuance of comprehensive transfer pricing (“TP”) rules to replace the existing Guoshuifa [2009] No. 2 (“Circular 2”).
On 17 September 2015, the SAT released a discussion draft of “Implementation Measures of Special Tax Adjustments” (“Discussion Draft”) for public consultation. The Discussion Draft makes direct reference to various draft recommendations proposed in the OECD’s BEPS Action Plans, and integrates elements of the OECD proposals for TP rules and anti-tax avoidance rules in the context of China.
It is expected to take effect from the 2016 tax year.
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