Study On Advance Pricing Agreement In Transfer Pricing

Along with world economics integration advancement acceleration, the multinational enterprises played a more and more important role in the world stage. Transfer pricing of multinational enterprises can be viewed as a process of dynamic game played by multiple agents of different interest. It is essential for multinational enterprises to optimize the distribution of resources through transfer pricing or educe transaction costs. However, transfer pricing abuse can impair the interest of the home country and/or host countries. Henceforth, government regulations on transfer pricing are initiated.Advance Pricing Arrangements transfers the government regulation on transfer pricing from post-modification mode to pre-agreement mode, which avoids the limitation of post-modification and reduces effectively the transaction costs of tax collection.Since the beginning of 1980s, our country has implemented the policy of opening to the outside world and the foreign investment enterprise and the foreign enterprise develop very quickly, also existing seriously transfer pricing abusing. However, compared with the developed country, our tax regulations on transfer pricing and monitor method are quite relative backwardness, especially the Advance Pricing Arrangements is still in the beginning, both the theory and the practices are poor.After intensive analysis of the definition, the taxation, the principals and the advantages of Advance Pricing Arrangements, this paper narratives the developing status of Advance Pricing Arrangements for both international and our country in details. Trying to set up a game playing model, it exposure the mechanism and the developing rules of Advance Pricing Arrangements by the basic economics and game playing theory .Finally, from the practice angle, this paper pointed out the suggestion and the strategy in order that our country develops and consummates Advance Pricing Arrangements.