Strategizing Multinational Tax Risks

http://www.chinatax.gov.cn/n8136506/n8136608/n9947993/n9948014/n12360820.files/n12360827.pdf?goback=%2Enmp_*1_*1_*1_*1_*1_*1_*1_*1_*1_*1#%21

THe 2012 Annual Report outlines China’s Advance Pricing Agreement (APA) process, in addition to statistics for 2005 – 2012.  The agenda of the report includes:

• APA Program definition and advantages
• Legislation and Development of APA program
• APA Procedures
• Taxpayers’ Rights
• Statistics and Contacts
• Appendices, including formal meetings and applications

A Best Practices methodology addressing APA’s should be outlined in the global Tax Risk Framework for every multinational corporation.  This methodology will summarize some of the following points:

• A description of the decision matrix for an APA and its implementation
• Preference for unilateral or bilateral APAs
• Implementation of global/regional/country proactive and/or reactive risk management tools
• Outline of significant jurisdictions, timelines, work plan, and accountability for implementation
• Integral coordination with tax counsel, and other functional business units
• Review plan for an APA methodology in today’s rapidly changing tax environment (evidenced recently by the change in administrative leadership for the India APA program)
• Review of applicable gaps that may exist to retrieve information readily for proactive, or reactive, APAs

Tax jurisdictions, and MNEs, are increasing their focus on APAs amidst a trend of growing uncertainty and complexity in international transfer pricing principles.  The China APA Report provides good preparation for a better understanding of the complex, and lengthy, preparation needed by all parties to obtain an APA.