The COVID-19 pandemic has created unprecedented challenges and uncertainties for the operations of multinational enterprises (MNEs). One core concern is dealing effectively with transfer pricing risks.
On 18 December 2020, the Organisation for Economic Co-operation and Development (OECD) issued its “Guidance on transfer pricing implications of COVID-19 pandemic” (the OECD Guidance), which represents the consensus of the member states or regions, including China, in the OECD's Base Erosion and Profit Shifting (BEPS) Inclusive Framework. Since then, various jurisdictions and regions, including Australia, Singapore, New Zealand, and Hong Kong SAR, have issued local interpretation and guidance on the transfer pricing arrangements of MNEs during times of economic uncertainty in the Asia-Pacific region.
In this context, on 30 September 2021, the International Taxation Department of China’s State Taxation Administration (STA) released its “Questions and Answers on Anti-Tax Avoidance During Pandemic Prevention and Control” (the "Q&A") on its portal. This is the first time that the STA has provided, in written form, prescriptive instructions for tax authorities and MNEs when analyzing the impact of the COVID pandemic from a transfer pricing perspective. Observations on the Q&A related to transfer pricing are provided in this Tax Insight.
International Tax and Treasury