Study On The Methodologies And Difficulties Of Transfer Pricing Adjustment

Since the Reform and Opening up, China has made a great achievement in the economic field. After entering the21st century and with the background of globalization, the transfer pricing issue has come out as the cross-border capital increased. The tax sovereignty of our country would be harmed by the multinational enterprises which avoid tax through the transfer pricing arrangements. While the taxation burdens between the local companies and the multinational enterprises are different, the competition would be unfair. Moreover, for sino-foreign joint venture, by using transfer pricing arrangement, foreign shareholder could get more profit than Chinese shareholder. So, for now, the transfer pricing issue would certainly damage to the economy of our country, and it should be paid more attention to by the taxation authorities of our country.The study methodology of this paper includes literature analysis and case analysis. The paper begins with the basic theory of transfer pricing, introducing the definition and the development of the transfer pricing theory, and then expounds the motivation and the influence. Next, the paper explains the methods of transfer pricing from the point of theory and application. Then the paper discusses the development and the current situation of China’s transfer pricing taxation system, and some difficulties of the transfer pricing adjustment. Following that, the case study shows how to solve the difficult problems by some technical way. In the end, A few advices and suggestions are given after the cases. That might have some positive meaning to the Chinese taxation authorities. The Chinese transfer pricing taxation system should be improved and provides more guidance for actual adjustments.