Transfer pricing: what developing countries are doing, China edition

china-flagLast December Krishen Mehta wrote us a longish article entitled Developing Countries and Tax – Ten Ways Forward. It outlines a series of measures that developing countries can consider as they seek to curb tax cheating by multinational corporations. This blog is really just a pointer to an article in the publication China Briefing entitled In Curbing Transfer Pricing, China Moves Beyond OECD Guidelines.

Transfer pricing is, as tax expert Lee Sheppard put it, “the leading edge of what is wrong with international tax,” and it’s a great concern for all countries. Read more about it here.

It complements Krishen Mehta’s article nicely, and outlines some concrete and robust steps that China is taking:

  1. Services such as control, management or supervision that are rendered for the purpose of protecting the interests of the company’s shareholders. As the China-based entity is not the beneficiary of these services, these transactions do not comply with the arm’s length principle and are therefore not deductible
  2. Duplicate services: e.g. where the Chinese taxpayer has purchased or carried out services by itself, yet also pays an overseas affiliate for them.
  3. Services that are passive or ancillary in nature – i.e., there is no specific service that is carried out by the overseas related party specifically for the Chinese enterprise
  4. Services that do not bring about direct or indirect economic benefit to the enterprise
  5. Services that are irrelevant to the risks or business that the Chinese taxpayers carries out
  6. Services that have already been compensated for in other transactions

This is just one section from the longer article. We will now update Krishen’s article with reference to this.

Related Posts

UN must defend target to curtail multinational companies’ tax abuse

Photo by Luca Santori, Creative Commons LicenseThe Tax Justice Network, The Independent Commission for the Reform of International Corporate Taxation, and the Global Alliance for Tax Justice call on the UN Secretary General to make sure the commitment to action on tax abuses by multinational companies remains part of the new UN Sustainable Development Goals.


The BVI: Responsible for worldwide tax losses of $37.5 billion a year

BVI report blogAn extraordinary report by consultants Capital Economics, for BVI Finance, claims that the British Virgin Islands are responsible for $1.5 trillion of assets invested around the world, and that these result in 2.2 million jobs and $15 billion in tax revenue. A better approximation would be that the BVI imposes global tax losses of $37.5 […]


Event: Making Tax Work for Women in the UK and Globally

Invitation_ Tax and Gender eventOn Wednesday 28th June 2017 at 16.30 our very own Liz Nelson will be speaking at an event in London that aims to bring together gender and tax justice advocates to highlight the need for coherent and gender-responsive fiscal policies to safeguard the rights of women and girls both in the UK and globally. The […]


Historic event on women, human rights and tax justice in Bogota

BogotaLast week civil society organisations, researchers, labour union activists and policy makers met in Bogota, Colombia to explore how tax justice issues can ensure governments, multinational corporations and others meet their obligations to women in order to secure their full range of human rights. The Women’s Rights and Tax Justice conference opened with a conversation […]


The Offshore Wrapper: the Panama Papers, one year on

Photos from the Protest outside PwC 1 Embankment Place, part of the Global week of action for tax justiceWelcome to the Offshore Wrapper – your weekly update from TJN.  Happy Paniversary! This week it’s been one year since the Panama Papers were leaked, and a number of organisations around the world have been marking the occasion though the global week of action for tax justice. In London, activists from the TJN and the […]


Leave a Reply

Your email address will not be published. Required fields are marked *

Back to Top