The US APA Practice And Its Implications To China

With the speedup of the globalization process, transactions within Related Enterprises have developed dramatically and thus triggered more and more taxpayers' tax avoidance activities. To cope with this situation, most countries have established their Transfer Pricing System (TPS). However, the TPS is an afterwards adjustment method and has many flaws. Advance Pricing Agreements or Advance Pricing Arrangements (APA), a pre-confirmation solution, has inevitably become the way out. Among the many countries that have established their APA systems, the US APA system is the most maneuverable, advanced one and represents the fastest development speed in the world.China has a short history of APA application with few practice and inadequate legislation. Based on accumulated APA practice, China should use the US experiences for reference. In the practice area, China should accelerate the APA application especially the bilateral APAs, establish a uniform APA database, etc; in the legislation area, China should do a lot more such as to set up a centralized APA manage mode, to perfect the Transfer Pricing Methods, to add relevant provisions in comparable analysis, critical assumptions, etc. It is certain that China's APA system will constantly improve by practice and by learning from the US experiences.