To manage the transfer pricing issues, it is important to first understand the transfer pricing risk of the Chinese subsidiary and document the findings in a local file. The Chinese transfer price regulation states that if a company has a tangible transaction with a related party for more than 200 million yuan, or an intangible transaction and service transaction with a related party for more than 40 million yuan, or if a company with limited functional risk (i.e. a contract manufacturer) suffered losses in a year, the company is required to prepare a local file.
POINTWith years of practice and analytical experience, we are able to prepare a transfer pricing document that accurately reflects tax authority’s requirement and follows Chinese regulation within a reasonable budget. The first half of local file consist of company overview and functional risk analysis which can be efficiently finished by involving your team. For local file’s comparable analysis, our advisor can go through the analysis with your team so in future your team can prepare the local file by yourself.
Through the local file preparation, we hope you can understand the key points of preparing the local file. Local file cannot be prepared by subsidiary alone and should be worked together with the headquarter to exchange information. Our advantage as a boutique firm is the flexibility of exchanging information with any consulting firm without language barriers. In case of tax audit, we are prepared to communicate directly with local tax bureau in order to resolve the issues smoothly.
We hope you choose us as your long-term advisor that can lower your potential tax risk.
