Research On Tax Risk Control Of Transfer Pricing For MG Company

Transfer pricing is the inside price within the multinational group which is determined by the activities incurred between parent company and subsidiaries,or between subsidiaries in process of the purchasing and selling goods,providing and receiving services,and other transactions.With the acceleration of the process of economic globalization,more and more multinational corporations began to seek opportunities to maximize the benefits from global strategic perspective.Transfer pricing between related parties has been adopted as an effective method of tax planning.Over the four decades of China's reform and opening up,China has been maintaining a high economic growth rate in the past years and has made significant progress in attracting foreign funds to invest in China.Foreign investment in China continued to be ranked second in the worldwide for years.Multinational companies generally use transfer pricing to transfer their China entities' profit to overseas entities to achieve the purpose of tax avoidance.In order to prevent the loss of state tax benefit,China tax authority has continued to formulate and improve relevant tax laws and regulations on transfer pricing.China tax authority puts forward a more complete and specific requirement for transfer pricing activities between related parties.On the other hand,the overall qualities of tax official have improved greatly in recent years.China tax authority has adopted more advanced management techniques and more strict monitoring measures in the anti-tax avoidance activities.Multinational corporations in China are facing increasing transfer pricing tax risk.Taking MG company as the research object,the article introduces the basic background of the research object firstly,including the internal and external features of operation activities,MG company's related parties transactions and current transfer pricing management situation.Based on current effective transfer pricing laws and regulations and other tax administration external environment,the article identifies the tax risk of the major related party transactions.Risk identification results shows that related party transaction,including raw material procurement and finished goods sales,between MG company and MG international may exist transfer pricing tax risk,further action should be taken to evaluate and control the related risk.From the perspective of tax risk control,this article analyzes the functions and risks conducted by MG company in related party transaction,transfer pricing method adopted,comparability analysis and other segments.Based on the above identification and evaluation,this article concluded that the related party transactions between MG company and MG International lead to great transfer pricing tax risk,and further actions should be taken tocontrol the risk.Finally,from enterprise tax risk control perspective,this article is aimed to provide some specific methods and recommendations to control the tax risk,including selecting the appropriate transfer pricing method based on the group's overall strategy,prepare the appropriate explanation for the lower profit rate,weigh pros and cons carefully and determine whether to apply for an advance pricing arrangement,seek technical support from external transfer pricing expert,To ensure the effective implementation of the transfer pricing tax risk control,this article finally puts forward risk control measures.