The Research On Transfer Pricing Of McLemore Dahua Co.,Ltd

Thomas L. Friedman-The New York Times famous columnist, three PulitzerPrize winners has a bestselling book which everyone familiar with-"the world isflat", he not only reveals the global of the world, but also reveals the complexpolitical and economic problems in simple terms. True that the integration of theworld economy has brought us a new changes, but also being the inevitable impact bythe pace of reform and opening up in China. For many years China has been one ofthe major countries to attract foreign direct investment, the proportion of transactionswithin the group between multinational related parties is growing fast, the quantityand complexity of transfer pricing is also become more and more. Double taxationand double non-taxation which the transfer pricing have been caused is a hot issue bynational tax authorities and taxpayers.The transfer pricing is so important, the paper will commence with OECD andChinese transfer pricing regulatory frameworks and its introduction, including thearm’s length price, related parties, transfer pricing methods, transfer pricingdocumentation requirements and transfer pricing investigation. These frameworksand conditions has a very important significance for the McLemore Dahua’ transferpricing analysis in the paper.The paper will introduce the background of McLemore Dahua by the transferpricing angle, which including shareholding changes, historical financial data (2008-2011); detailed disclosure of the data and content of the related parties transactions,which including the components which purchase from domestic and foreign’ relatedparties, the sales for domestic’ related parties transactions and intangible assets; Toanalyze and characterized of the function and risks that McLemore Dahua could bornso that further analyze the existing transfer pricing issues. As used by transfer pricingmethods of McLemore Dahua–rational analysis of residual profit split method, discussed the specific cost savings problem of China; while focusing on the analysisof the standard pricing model of McLemore Dahua’ standard profit margin and proofthe fact which has been controlled by related transaction prices; To analyze andresearch the McLemore China and one of its major related parties McLemore Dahua’risk–the reasonable of benefit ratio, to identify the reasonable profit margin ofMcLemore Dahua and McLemore China’ comparable parties. Finally, the paper hasgiven a brief description of the investigation’ problem from McLemore transferpricing and the transaction of their sales channels, discussed the peculiar of China’marketing intangible asset and the income approach problems.Through the above analysis, we can conclude that the purchase price and thestandard profit margins of McLemore Dahua are controlled by the McLemore group,and the group does not account the risks of it between the related parties. The profitlevels of McLemore Dahua progressively lower than the comparable parties’, whileMcLemore China has getting a much higher than comparable parties, the realbeneficiaries is McLemore Japan which represent of McLemore Group. For the waysto solve these problems, this paper presents that APAs can be choose in the stage, andhave given the nature of the APAs and the analysis and presentation of the latestdevelopments.