The Research Of Transfer Pricing Risk Management Of Chinese Multinational Company

With the development of China’s economy, an increasing number of Chinesecompanies have started to enter the international market seeking for broader market andgreater development potentials, after the acquisition of substantive industrial experiencesand business capitals in China domestic market. Accompanies by the globalization, thequantity of intercompany transactions within international companies has raisedceaselessly at the same time, which resulted an escalation of international trade frictionsand disputes. The conflicts of product prices and tax burdens form the major part ofinternational trade frictions and disputes, while transfer pricing issue becomes one of themost controversial and rapidly developing issues among all the conflicts. How to dealwith the global transfer pricing issues is currently critical in the company’s research,decision-making and management.The reasonable business arrangements between related parties are quite likely to besuspected of tax avoidance nature, since transfer pricing between rela ted parties hasbecome a commonly used strategy by international companies to avoid tax burden.Therefore, the Chinese companies need to pay great attention when establishing theinternal transfer pricing management regulation to avoid tax incremental adj ustment oreven double taxation posed by tax authorities due to their unreasonable transfer pricingarrangement.This essay discusses and analyzes the transfer prices and pricing mechanism betweenrelated parties in the tangible goods buy-sell, provision of services, creation, transfer andlicense of intangible assets, as well as the intercompany loans etc. The essay also discusses other issues such as the related party transaction structures, current internationaltransfer pricing regulation, transfer pricing analysis methods, various transaction modelanalysis and build-up. The purpose of the paper is to provide an integrated set ofresearch directions and management strategies to solve the transfer pricing issues faced byChinese companies when entering the global market. The differences between Chinesemultinational companies and foreign companies are also discussed and analyzed in thispaper, in order to form a more practical and effective transfer pricing managementsolution for Chinese companies.