Study On Safe Harbor Rules On Intra-Group Services Transfer Pricing In Multinational Enterprises

In the intra-group services transaction in a multinational enterprise,it is required that all enterprises use arm's length principle to determine their intra-group services price,which is not only arduous and costly.Based on the characteristics of the low value-adding intra-group services,tax revenues obtained by taxation agencies from the transfer pricing adjustments of intra-group services may be much lower than the administrative costs of applying arm's length principle.Safe harbor rules provide certainty for taxpayers and tax authorities and reduces taxpayers' compliance costs,improving the efficiency of taxation authorities.The Safe harbor rules should be applied to intra-group services to achieve a balance between appropriate fees for low value-adding intra-group services and headquarters compliance expenses,and to protect the tax base of the paying country.OECD,the European Union,and several countries have included Safe harbor on the intra-group services transfer pricing rules.The article analyses in detail the various simplification measures taken by tax administrations of various countries to resolve some of these issues for the taxpayers.China should be in line with international standards,draw on the specific content of these rules,and introduce safe harbor rules in the light of China's specific conditions.China needs to make a detailed design of the content of the safe harbor rules for the intra-group services transfer pricing in laws and regulations so as to avoid the abuse of safe harbor rules.It should also advocate the proposal to apply the international coordination mechanism for the safe harbor rules on intra-group services to prevent double taxation.In addition,we must actively participate in the establishment of a tax information sharing and exchange mechanism so that the basis for setting and operating the rules is more scientific and effective.