On December 5, 2014, the State Administration of Taxation (“SAT”) released the 2013 China Advance Pricing Arrangement (“APA”) Annual Report (“Annual Report”). This fifth annual report focuses on China’s APA mechanisms, procedures, and practices, and provides statistics for 2005 through 2013, accompanied by an analysis of the statistics. The Annual Report came after the SAT declared publicly in September 2014 that it would suspend APA negotiations with treaty partners through 2015. Many had anticipated that the SAT would delay publishing its annual report as well because the SAT is short handed. The release of the Annual Report, although later than the customary target date of July 1, shows that the SAT is still committed to the APA program, and that the suspension is only temporary.
It is expected that the SAT will turn its attention back to the APA program in September 2015. The fewer bilateral APAs executed in 2013 compared to the number 2012 is attributable, in part, to the limited personnel and resources that the SAT has available to deal with bilateral APAs. That being said, the SAT is currently evaluating the creation of a separate division to deal with mutual agreement procedures for transfer pricing issues. Once that division is created, more resources would be devoted to the APA program, and the length of time it takes to conclude an APA may be reduced.
Baker & McKenzie
28 Tax News and Developments February 2015
For a more detailed discussion, see the January 2015 Baker & McKenzie Tax Client Alert, China Releases its 2013 APA Annual Report, also available under publications at www.bakermckenzie.com.