On December 5, 2014, SAT issued the China Advance Pricing Agreement Annual Report (2013) (“the Report”), which covers the statistics on China’s advance pricing agreements (“APA”) for January 1, 2005 to December 31, 2013. This is the fifth year that SAT has issued the Report to introduce the China APA system, procedures and implementation.
According to the Report, China signed 11 unilateral APA and 8 bilateral APA in 2013. In total, China had signed 67 unilateral APA and 37 bilateral APA as of December 31, 2013. Based on the statistics of pending applications, 108 APAs are in various stages of application and 2 APAs are agreed but not yet signed. The statistics indicates that companies are becoming more and more interested in signing a bilateral APA, to gain future certainty in tax and to reduce the risk of international double taxation.
The statistics also showed the following characteristics of the China APA as of December 31, 2013:
- the related-party transactions involving China APAs are mainly purchases and sales of tangible assets;
- the transfer pricing method adopted in signed APAs is mainly the transactional net margin method (TNMM);
- most applicants for China APAs are manufacturing companies;
- bilateral APAs are mainly signed with Asian countries;
- most APAs are achieved within two years of application date.
Date of issue: December 5, 2014.