How to implement tax planning of transfer pricing? Let's look at the following example.
Enterprise A mainly produces and manufactures X products, which have three processes. After the first process is completed, the unit production cost is 20 yuan, the second process is 450 yuan, and the third process is 500 yuan. The average selling price of product X is 800 yuan per piece. In 2000, 250,000 X products were sold. A The applicable income tax rate for enterprise is 33%, and other relevant data are as follows:
(1) product? A stick? 00 million yuan;
(2) The product sales cost is 1.25 million yuan;
(3) product sales tax and additional 2 million yuan;
(4) Management expenses, financial expenses and sales expenses totaled 23 million yuan;
(5) The total profit is 50 million yuan;
(6) Income tax payable16.5 million yuan.
The enterprise analyzed every process of product production, and found that the cost of the third process increased very little, only around 50 yuan, after the completion of this process, the products were sold abroad.
They imagine that if a wholly-owned subsidiary (hereinafter referred to as enterprise B) is invested in a low-tax area, such as Shenzhen Science and Technology Industrial Park, the applicable enterprise income tax rate is 15% because the enterprise is not far from Shenzhen and is a high-tech enterprise in Shenzhen Science and Technology Industrial Park. Enterprise A takes the second working procedure of X product as the finished product, increases the price by 20% according to the unit cost of 450 yuan, and sells it to enterprise B at the price of 540 yuan, and enterprise B is responsible for completing the third working procedure of X product. Assuming that the management expenses, financial expenses, sales expenses, taxes and additional 10% of enterprise A are transferred to enterprise B, enterprise B will increase the management expenses by10 million yuan due to the newly established company. So: Enterprise A:
(1) product sales revenue = 25× 540 = 13500 (ten thousand yuan)
(2) The product sales cost = 25× 450 = 1 1250 (ten thousand yuan);
(3) product sales tax and additional 6,543,800 yuan;
(4) Total management expenses, financial expenses and sales expenses = 2300× 90% = 2070 (ten thousand yuan);
(5) The total profit is 0;
(6) The income tax payable is 0.
Enterprise b:
(1) The product sales revenue is 250,000 pieces multiplied by 800 yuan, which is equal to 200 million yuan;
(2) The unit cost of finished products is equal to 540 yuan plus 50 yuan and 590 yuan, and the product sales cost is equal to 250,000 pieces multiplied by 590 yuan, which is equal to147.5 million yuan;
(3) product sales tax and additional 200,000 yuan;
(4) Total management expenses, financial expenses and sales expenses = 2300×10%+100 = 3.3 million yuan;
(5) The total profit is 49 million yuan;
(6) The income tax payable is 7.35 million yuan.
Because enterprise B is a wholly-owned subsidiary of enterprise A, if the retained earnings of enterprise B are not distributed, enterprise A does not need to pay income tax according to the tax rate difference. Enterprise A saved 9 1.5 million yuan (654.38+0.650-7.35) in income tax by setting up subsidiaries in low-tax areas.
In this case, although there is a relationship between enterprise A and enterprise B, the tax authorities will not adjust the pricing of enterprise A, because the finished products of enterprise A belong to intermediate products, and enterprise A only gains industrial processing profits, and its pricing is set at 20%, which has far exceeded the cost profit rate 10% stipulated in the tax law. The main process of product X is concentrated in enterprise A, and most of its management expenses and financial expenses are concentrated in enterprise A. The third process of product X undertaken by enterprise B (the manufacturing cost is only 50 yuan, accounting for 10% of the manufacturing cost of the whole product) is only simple production processes such as processing and packaging, so the period cost is quite low. After the establishment of Enterprise B, the salaries and other expenses of the sales department staff of Enterprise A and the original production staff of the third process will be transferred to Enterprise B accordingly, accounting for about 65,438+00% of the total period expenses. Due to re-registration, the new management cost of enterprise B is about 6,543,800 yuan. Through transfer pricing, although the processing profit rate of enterprise A is set at 20%, the profit of enterprise A is almost zero, and most of the profits are realized in enterprise B, thus successfully implementing the tax planning of transfer pricing.
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First, the basic situation of the enterprise.
Company A is a wholly-owned enterprise invested by Korean company B in M city, and its products are plastic woven bags specially used for wool packaging. A company 1995 was put into production in the second half of the year and made a profit that year. Since it has been in business for less than half a year, the profit-making year starts from 1996. 1996, Company A lost 654.38+10,000 yuan. The sales of 1997 was the same as that of 1996, but the loss reached1500,000 yuan.
Second, related relationships and related transactions.
Company A is a wholly-owned subsidiary of Korean company B in China. All products of company A are sold to company B, and company B sells them to the outside world. Company B also collects sales commission from Company A, 1997 is 300,000 yuan. In addition, Company A paid 450,000 yuan to Company B on 1997.
Third, case investigation and analysis.
Through the field investigation of Company A and the review of relevant accounts and contracts, the Tax Bureau found the following doubts:
(1) The product price of Company A 1997 is lower than that of Company A 1996, and the commission paid to Company B in Korea accounts for 7.8% of the sales. According to the information held by tax auditors, the internationally accepted payment ratio is 5%;
(2) The repair expenses listed in Company A's book 1997 amounted to 900,000 yuan, and the recipients were Company B and another Korean company, Company C, of which Company B received 450,000 yuan.
According to the general situation of transfer pricing, the tax bureau conducted an investigation from the sales price of related party transactions. The results show that the price drop of company A's products is due to the decline of wool production in the main international wool producing areas and the weakening demand for wool packaging bags, which leads to the forced price reduction of company A. The price information obtained by the tax bureau from other manufacturers producing the same products also confirms the above situation. Comparing the sales price of Company A to Company B and the resale price of Company B, the price increase of the latter is only 1.5% ~ 2.5%. The materials of Company A are purchased from domestic non-related parties.
On the whole, it is unlikely that Company A and Company B will use the purchase and sale price of products for transfer pricing operation.
The tax bureau turned to analyze the sales commission paid by company A to company B, and found that its rationality was doubtful. The explanation of company A is that most of the staff of company B in Korea are based in M city, so the cost is higher. The tax bureau refuses to accept this explanation, and advocates adjusting the commission according to the international average of 5%, that is, the taxable income of Company A should be increased by 1997 65438+ ten thousand yuan.
The tax bureau thinks that the repair fee paid by Company A to Company B is also unreasonable. Because the maintenance contract was signed between A and B and Company C, according to the contract, Company C sent technicians to Company A on 1997 to provide maintenance services for Company A; Company B only serves as a "bridge" between Company A and Company C. Therefore, the 450,000 yuan paid by Company A in the name of "repair fee" in 1997 is unreasonable, so the taxable income of Company A in that year should be increased by 450,000 yuan.
Fourth, adjust the plan.
According to the above investigation results, the tax bureau decided that the unreasonable part of the labor service fees paid by Company A to its affiliated company Korea B in 1997 could not be deducted from the taxable income, increasing the taxable income of Company A by 550,000 yuan, and reducing the loss of Company A in 1997 from the original 6.5438+0.5 million yuan to 950,000 yuan.
Fifth, case review.
(1) The internal labor cost is a very complicated problem in the field of transfer pricing, especially the service cost related to special fixed assets and intangible assets and the management service fee. Because it is generally difficult to find comparable uncontrolled transactions and determine the costs and benefits of such transactions, the price of internal services is quite flexible, and the application of the arm's length principle is greatly limited. The breakthrough of this kind of transaction transfer pricing audit is to analyze the role of service in the receiver's operation: whether it is daily or special; Whether it is associated with a specific product or asset, or usually serves multiple products or assets; Whether this service is necessary or optional in the production and operation of enterprises; Wait a minute. This analysis is to determine whether the service is exclusive or competitive, and whether there are other purposes (technical confidentiality, management control, etc.). ), whether it is priced at cost or should have a certain profit bonus.
(2) As far as this case is concerned, it is doubtful whether the reason why Company B charged Commission from Company A is sufficient ... because from the case, Company B is a reseller. It buys products from Company A and sells them at a higher price. It does not provide sales agency or other intermediary services for Company A. From this point of view, it seems unreasonable for Company B to charge sales commission to Company A. In other words, it is inappropriate to deduct commission before tax according to the standard of 5% of sales. The most crucial point is that Company B did not provide intermediary services for Company A. ..
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Enterprise basic information
LG Hardware Products Co., Ltd. is a Sino-foreign joint venture. The Chinese side of the joint venture is a steel mill in this city, with a capital contribution ratio of 60%, and the foreign side is a metal products company (Company J) in Taiwan Province Province with a capital contribution ratio of 40%. LG's products are mainly used for export. 199 1 After the company was established, it lost 2 1 10,000 yuan in that year. 199 1 At the end of the year, J Company of Taiwan Province Province and Chinese shareholders reached a contract contracted by a foreign party. The main contents are as follows: the foreign party pays 500,000 yuan to the Chinese side every year, and the Chinese side does not participate in the management and decision-making of LG, and the sales price of the products is completely determined by the foreign party (see Table 8.l).
Table 8.1Summary of Operating Conditions of LG Company over the Years Unit: 10,000 yuan
199 1 year
1992
1993
Sales revenue
50
380
celebrity
Cost of sales
55
330
305
gross sales
-5
50
95
profit before tax
-2 1
seven
46
All products of LG Hardware Products Co., Ltd. from 199 1 to 1993 are exported to Taiwan Province J Metal Products Co., Ltd. Because J Company of Taiwan Province Province holds 25% of the shares in LG Company, which exceeds the equity standard of 25% of the affiliated enterprises of Chinese mainland, there is an obvious relationship between LG Company and J Company of Taiwan Province Province.
Case investigation and analysis
On the books, although J Company achieved profits in 1992 and 1993 after contracting LG Company, combined with the contract, it will be found that J Company has to pay 500,000 yuan to the Chinese side every year, which means that J Company in Taiwan Province Province has not benefited from LG's operation, but paid money to the Chinese joint venture, which is inconsistent with commercial practice. The local taxation bureau suspects that there is unreasonable transfer pricing behavior between LG and J.
The IRS asked LG to provide shareholders? Product sales and related business information, and ask them to explain the pricing of related transactions. LG Company provided the resale price and resale fee of J Company in Taiwan Province Province to an unrelated third party within the specified time, and admitted the fact that the related party transactions between LG Company and J Company were priced unreasonably.
Adjustment scheme
According to the information provided by LG, the local taxation bureau decided to adopt the resale price method for adjustment. The resale price of Taiwan Province J Company provided by LG Company is 9 yuan/kg, and the expenses to be deducted include:
(1) Taiwan Province customs declaration fee: l.3 yuan/kg.
(2) Freight: 0. 13 yuan/kg.
(3) Sales expenses, loan interest and other expenses: 0.25 yuan/kg;
(4) Commercial profit, calculated as 10% of the resale price: 0.9 yuan/kg.
Finally, the normal selling price of LG Company = 9-1.3-0.13-0.9 = 6.42 (yuan/kg).
The sales of LG in 1992 and 1993 were 633,000 kg and 667,000 kg respectively. According to the reasonable price of 6.42 yuan/kg determined by the tax bureau, the pre-tax profit of 1992 is 264,000 yuan, and that of 1993 is 282,000 yuan. Therefore, the adjusted profit of 1992 was 334,000 yuan, which offset the loss of 2 1 10,000 yuan in the previous year, and there was still a profit of124,000 yuan in that year. In this way, 1992 became the year when LG began to make profits.
Case review
First of all, this case shows a relatively complete application process of resale price method. The case is complete because it fully embodies the important characteristics of the resale price law, that is, deducting resale expenses and reasonable commercial profits from the resale price and calculating the normal price of related party transactions. It should be noted that some deductible expenses are intuitive, such as customs duties, customs declaration fees and transportation fees. However, other expenses such as sales expenses and management expenses may not directly determine the deductible amount, especially when different accounting systems at home and abroad are involved, the contents of these expenses may be different. In this way, what can be deducted in one country may not be deducted in another country, which may lead to double taxation. In addition, when determining resale expenses and resale profits, it should be emphasized on the basis of case studies. If a predetermined deduction standard and profit standard are applied to all situations, it is against the normal trading principle.
Secondly, the cooperation between enterprises is of great significance to the smooth transfer pricing investigation. In this case, the resale price and resale expenses are provided by the enterprise, which reduces the investigation burden and expenses of the competent tax authorities. If the enterprise does not cooperate, the competent tax bureau may not be able to use the resale price method to make adjustments.
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The transfer pricing method mainly avoids taxes through the transaction forms of affiliated enterprises that are not in line with commercial practices. Associated enterprises (companies) mainly refer to two or more enterprises (companies) with direct or indirect control and controlled legal relationship. This legal relationship between control and controlled is mainly reflected in equity participation, because the proportion of equity participation determines the degree of participation in management and control. The reason why the transfer pricing method is widely used in affiliated enterprises is that any commodity producer, operator, buyer and seller have the right to determine the price standard of the products they produce and operate according to their own needs. As long as the buyers and sellers are willing, others have no right to interfere, which is a legal act.
There are many means of transfer pricing between affiliated enterprises, mainly in the following forms:
(1) The commodity transactions between affiliated enterprises adopt the strategy of lowering the pricing, so that the turnover tax payable by enterprises can be turned into profits and transferred, so as to achieve the purpose of tax avoidance. For example, rubber enterprises are enterprises that implement products with high tax rates. In order to reduce the product tax burden, it sells self-made semi-finished products at low prices to affiliated enterprises with lower product tax. Although it reduces the sales revenue of the enterprise, it makes the affiliated factory get more profits, and the enterprise gets more profits from it, thus achieving the purpose of reducing the tax burden.
(2) Commodity transactions between affiliated enterprises adopt the strategy of raising prices, transferring income and realizing tax avoidance. Some enterprises that implement high-rate value-added tax deliberately raise the purchase price and transfer profits to affiliated enterprises when purchasing products from affiliated enterprises with lower tax burden. This can not only increase the VAT deduction of enterprises, but also reduce the burden of VAT and income tax. Then, get more profits from the retained profits of affiliated enterprises with low tax burden.
(3) Free loans or prepayments are adopted between affiliated enterprises to transfer the interest burden to achieve the purpose of tax avoidance. Some enterprises with relatively abundant funds or smooth sources of payment, because of relatively heavy tax burden, often use free loans or prepayments for their affiliated enterprises. In this way, all the interest paid by these funds is borne by the enterprises that provide the funds, which increases the cost and reduces the income tax burden.
(4) The services provided by affiliated enterprises take the form of unpaid or irregular remuneration, and the income is transferred for tax avoidance. For example, when some enterprises provide sales, management or other services to affiliated enterprises, they don't collect remuneration as usual, and adopt the strategy of not collecting, overcharged and underpaid to transfer their income to the other party for tax avoidance, and then transfer it to which party when it is favorable. At present, it is particularly prominent that a large number of surplus staff in some state-owned enterprises are engaged in factory-run economy or tertiary industry, but their wages are still paid by the original enterprises, which reduces the income tax burden of the original enterprises and increases the profits of the new enterprises.
⑤ affiliated enterprises transfer profits to avoid taxes at irregular prices by transferring or using tangible assets. Some enterprises (especially large and medium-sized state-owned enterprises) sell or dispose of updated and idle fixed assets to some affiliated enterprises (mainly township enterprises and individual and private enterprises) at unconventional low prices. The loss is partly borne by the cost of the enterprise, which reduces the tax burden of income, and then obtains individual and collective benefits.
⑥ The affiliated enterprises realize tax avoidance by transferring and using intangible assets and transferring income at free or unconventional prices. Some state-owned enterprises provide their own production formulas, production technologies, trademarks and franchises to some affiliated enterprises (mainly township enterprises) free of charge or at low prices, and their remuneration is not accounted for in the income from technology transfer, but benefits from the profits retained by the other enterprises. This not only reduces taxes, but also solves the welfare needs for enterprises.
In short, affiliated companies can adopt various methods to control transfer pricing and transfer profits, creating the illusion that profitable enterprises are not necessarily profitable and loss-making enterprises are not necessarily losing money.
At present, many foreign-invested enterprises in China use transfer pricing to transfer their profits on a large scale in order to avoid China taxes. For example, Bada Electronic Plastic Technology Co., Ltd., a Sino-foreign joint venture, mainly produces children's toy cars. In addition to product packaging supplies, other materials such as electronic components and small motors are imported, and 97% of products are exported. The imported materials and products are all operated by foreign Hong Kong Hongyuan Company. The average unit cost of children's toy cars produced is 2 1.50 yuan, and the average selling price is 16.50 yuan, which is higher than the selling price in 5.0 yuan. In this way, the company transferred its income to Hongkong and avoided taxes in China. Hong Kong is a natural tax haven, and its tax jurisdiction is the jurisdiction of the source of income. Only income from Hongkong is taxed, and income from China is tax-free. Bada Company achieved the goal of comprehensive tax avoidance by this means. For another example, a domestic joint venture company set up a company in Hong Kong in order to take advantage of the preferential policies such as less income tax, free property tax and no capital gains tax in Hong Kong. The parent company sold a batch of goods with a cost of $6,543,800,000, which should have been priced at $6,543,804,000, and dropped to $6,543,800+065,438,000. The subsidiary company sold the goods at a price of $6,543,800+05,000. By comparison, we can find that the actual tax burden of parent and subsidiary companies is different before and after the price reduction.
Income tax payable by the parent company: (140-1000) × 33% =132 (ten thousand dollars).
Income tax payable by subsidiaries (the income tax rate of Hong Kong-funded companies is half that of Chinese mainland): (150-1400) ×16.5% =16.5 (ten thousand US dollars).
The total tax of the parent company and subsidiaries is:132+16.5 =148.5 (ten thousand yuan).
Taxes actually paid by the parent company and subsidiaries after reducing the transfer pricing.
Income tax payable by the parent company: (110-1000) × 33% = 33 (ten thousand yuan).
Income tax payable by subsidiaries: (150-1100) ×16.5% = 66 (ten thousand yuan).
The total tax of the parent company and subsidiaries is: 33+66 = 99 (ten thousand yuan).
Compared with before and after transfer pricing, the total tax burden is reduced to: 148.5-99 = 49.5 (ten thousand yuan).
At the same time, as long as the Hong Kong subsidiary does not remit the dividends payable to the parent company temporarily, it will achieve the tax avoidance purpose of the parent company. Then the Hong Kong subsidiary can use this income to buy real estate in Hong Kong for the company's business use, which can be exempted from property tax. In the future, after the sale of these properties, the capital gains tax payable for the sale of these properties can be exempted.
Another example is Hongyuan Company, a material manufacturer in Beijing, which specializes in manufacturing security doors. 1999 output 10000, cost 300 yuan, processing profit 150 yuan, business profit 60 yuan. The company has eight sales branches all over the country, which are responsible for selling the security doors produced by the company. These eight sales branches operate independently and conduct independent accounting. All the security doors produced by Hongyuan Company are sold in 1999. Try to calculate and analyze the income tax amount and profit level of Hongyuan Company and its sales branches according to the relevant provisions of the current enterprise income tax law. (Assuming that the profit level of each sales branch is the same)
Note: The current tax law stipulates that the enterprise income tax rate is 33%; However, if the taxable income is less than 30,000 yuan (including 30,000 yuan), the tax will be temporarily reduced at the rate of 18%; Enterprises whose taxable income is less than 654.38+10,000 yuan (including 654.38+10,000 yuan) shall be taxed at the tax rate of 27% temporarily.
Hongyuan company's profit level is:
150×10000 =1500000 (yuan)
The average profit of each sales branch is:
60× 10000/8 = 75000 (yuan)
Tax payable of Hongyuan Company:
1500,000× 33% = 495,000 yuan
Taxable amount of each sales branch:
75,000× 27% = 20,250 yuan.
Total profit of Hongyuan Company and its sales branches:
1500000+75000× 8 = 2100000 (yuan)
The total amount of tax payable is:
495000+20250× 8 = 657000 (yuan)
The overall level of tax burden is:
657000/2 100000× 100%=3 1.29%
As can be seen from the above calculation, Hongyuan's profit is on the high side, so it pays more income tax. In order to reduce the high tax burden caused by excessive profits, it adopts the method of transfer pricing to avoid taxes.
If the processing profit of each security door of Hongyuan Company is reduced from 150 yuan to 134 yuan, the sales profit of each security door of each sales branch will rise to 76 yuan.
Hongyuan company's profit level is:
134×10000 =1340000 (yuan)
The average profit level of each sales branch is:
76× 10000/8 = 95000 (yuan)
The tax payable of Hongyuan Company is:
1340000× 33% = 442200 (yuan)
The taxable amount of each sales branch is:
95,000× 27% = 25,650 yuan.
The total profits of Hongyuan Company and its sales branches are as follows:
1340000+9500× 8 = 2100000 (yuan)
The total amount of tax payable is:
442200+25650× 8 = 647400 (yuan)
The total tax burden level is:
647400/2 100000× 100%=30.82%
After the transfer pricing, the tax paid is 52,800 yuan less than before the transfer pricing.
495000-442200 = 52800 (yuan)
The total tax reduction level is:
(3 1.29%-30.82%)/3 1.29%= 1.5%
As can be seen from this example, as long as the profits of affiliated enterprises are high, they can "cut mountains" through transfer pricing, that is, whoever has high profits will try to transfer the profits higher than those of other enterprises, thus avoiding the high-profit part from bearing more tax burden.
Although the price transfer between commercial enterprises is close to that between production enterprises in quality, there are great differences in some technical aspects. In fact, the product price transfer between commercial enterprises is realized in the form of consignment, resale and profit-making, and these forms are all completed through various channels and reciprocal ways. In fact, there are many ways for commercial enterprises to provide convenience to each other, realize excess profits and avoid bearing more tax burdens.
For example, when the profit amount and profit rate of similar commercial enterprises are high or low, relevant enterprises can transfer part of their profits from high-profit enterprises to low-profit enterprises through nominal consignment, resale and concession. This method of "cutting mountains" between commercial enterprises is often very effective.
For example, suppose that the annual profit of a commercial sales company A is 6.5438+0.5 million yuan, while the annual profit of another sales company B is 40,000 yuan. Try to calculate the profit and tax burden levels of company A and company B?
The tax payable of Company A is:
15× 33% = 4.95 (ten thousand yuan)
The tax payable of Company B is:
4× 27% = 1.08 (ten thousand yuan)
The total profits of Company A and Company B are:
15+4 = 19 (ten thousand yuan)
The taxes paid by Company A and Company B are:
4.95+ 1.08 = 6.03 (ten thousand yuan)
The total tax burden is:
6.03/ 19× 100%=3 1.74%
If Company A and Company B reach an agreement or some tacit understanding, Company A will transfer 40,000 yuan of its profits to Company B in the name of consignment and resale, and remit 40,000 yuan to Company B through book processing, then the tax payment situation of Company A and Company B will change, and the same tax burden will also change.
Tax actually paid by Company A:
1 1× 33% = 3.63 (ten thousand yuan)
Taxable amount of Company B:
8× 27% = 2. 16 (ten thousand yuan)
Tax paid by Party A and Party B * * *:
3.63+2. 16 = 5.79 (ten thousand yuan)
The total tax burden is:
5.79/ 19× 100%=30.47%
Pay less tax after profit transfer than before:
6.03-5.79 = 0.24 (ten thousand yuan)
Reduce the tax burden in the following aspects:
(3.74%-30.47%)/3 1.74%=4%
From the above example, we can find that whether it is between production enterprises and commercial enterprises, or between similar production enterprises and commercial enterprises, tax avoidance by using transfer product pricing method is based on the adjustment of profit rate, that is, transfer pricing is to arrange and combine the surplus product values created by both parties in order to control them in their own hands or in the hands of related enterprises to the maximum extent.
Because the two parties implementing transfer pricing have certain affiliation and mutually beneficial cooperation, the transfer of profits and prices is by no means one-way, but the opposite. This time, enterprise A transferred the profit to enterprise B in this way, and next time, enterprise B will return it in another way. From a period of time, not from a certain transfer process, it can be found that both parties to the transfer will get tax benefits from their own activities.
Here we will use tax rate and profit margin to summarize the general scope of transfer pricing activities.
These ranges are:
First, the use of raw materials, spare parts, finished products, machinery and equipment. , such as buying raw materials and spare parts at high prices, directly increasing production costs and reducing profits; When pricing equipment investment, raise the price, falsely increase the investment capital and expand the depreciation base; When additional investment or equipment is made, by increasing the price of fixed assets, shortening the service life, increasing the cost, and increasing the extraction and distribution of depreciation expenses, the cost will increase and the profit will decrease, or the sales price of products will decrease and the profit will decrease.
The second is the use and transfer of intangible assets such as patents and proprietary technologies. If the amount of one-time payment is increased, the percentage of royalty will be increased according to the output, sales volume or profit of the transferee, and the royalty will be included in the price of equipment and materials to avoid withholding income tax.
Third, the use of labor services, such as providing labor services within an enterprise group, is gratuitous or extremely unreasonable.
Fourth, use loans. If according to the needs of profit arrangement, charge high or low interest on loans or prepayments.
In short, in the case of progressive tax rate, taxpayers always try to transfer their high profits to low-profit departments and enterprises to reduce the high tax burden borne by the high-profit parts; In the case of fixed tax rate, although there is no tax avoidance problem in form, the tax pressure with less profit is small.
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1. Buy at a high price, sell at a low price, transfer corporate profits, and evade taxes in China.
Most foreign-funded enterprises are Sino-foreign joint ventures. Our supply and marketing channels do not know the international market price, and often rely on imported raw materials and accessories to export finished products. Taking advantage of these weaknesses, foreign businessmen arbitrarily raise the prices of imported raw materials and auxiliary materials and lower the prices of finished products (acquisition or underwriting), resulting in the raw material cost of enterprises equivalent to the sales revenue of products, and some sales prices are almost the same as those of raw materials. As a result, many enterprises lost money, and foreign businessmen made money, which not only evaded taxes, but also caused losses to joint ventures.
2. Raise the price of imported equipment to avoid tax.
In Sino-foreign joint ventures in China, foreign investors usually provide part or all of the equipment as part of their investment. Due to the lack of international market information and understanding of similar machinery and equipment, it is impossible to accurately estimate the quality, level and price of foreign investment. Foreign investors take advantage of this to raise prices, which will greatly increase the value of fixed assets of enterprises, increase depreciation and reduce taxes, while foreign investors will get more dividends and bonuses with less investment, which will hurt us and benefit foreign investors.
3. Take advantage of the investor's identity, undertake enterprise projects, raise prices at will, and profit from them.
In order to win each other's cooperation, many joint ventures in China outsource their projects to foreign investors, so that foreign investors can not only benefit from raising the project price, but also take advantage of the tax difference between joint ventures and projects to obtain additional benefits of paying less taxes.
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In China, the advance pricing arrangement is increasingly adopted by multinational companies as a strategy to reduce the transfer pricing risk. Since 1998 first introduced the concept of advance pricing arrangement, about 130 advance pricing arrangements (all unilateral advance pricing arrangements) have been signed and implemented in the Pearl River Delta, Shanghai, Tianjin, Qingdao, Dalian, Xiamen and other different regions in accordance with the transfer pricing regulations ("Document No.59"). Taxpayers keep asking State Taxation Administration of The People's Republic of China to unify the implementation procedures of advance pricing arrangements.
In response to these calls, State Taxation Administration of The People's Republic of China promulgated the Detailed Rules for the Implementation of Advance Pricing of Business Transactions between Associated Enterprises on September 20th, which is a milestone in the history of transfer pricing in China.
The tax management of advance pricing for business transactions between affiliated enterprises refers to the transfer pricing principles and calculation methods applicable to related transactions when taxpayers and their affiliated enterprises buy and sell tangible property, transfer and use intangible property, provide labor services and finance. When applying for an appointment, according to the principles of voluntariness, equality and trustworthiness, the competent tax authorities at all levels will discuss, review, evaluate and negotiate with taxpayers.
Experts said that with the acceleration of the process of world economic integration, the problem of tax avoidance by multinational taxpayers has become increasingly prominent, and some multinational companies have adopted a large number of transfer pricing methods to avoid taxes. Implementation license