AmCham Shanghai’s Tax Committee hosted a briefing on China’s Announcement 42 on September 12. The briefing included presentations by Richard Bao, transfer pricing partner at Grant Thornton, and Mimi Wang, director of transfer pricing at KPMG. The event was moderated by Jie Liang, tax partner in the Cross Border Tax Services group of Deloitte.
Announcement 42 is China’s first domestic codification of the BEPS initiative in regards to China’s Action Plan 13. Bao and Wang explained the effects Announcement 42 would have on multinational operations whether based in China or outside. The topics discussed were the replacement of the existing single-tier documentation with a three-tiered system; the revamping of transfer pricing documentation and the introduction of “Country-by-Country Reporting;” and the latest requirements of annual reporting forms for related party transaction. Bao went into details on the criteria and content of the master file; Wang continued with the explanation of the local file and special file of the three-tiered documentation.
As China’s tax filing requires more information than other country standards, the speakers emphasized the need to communicate this effectively with headquarters, provided guidance on how to proceed if the authorities undertake an audit and how best to navigate which requirements go beyond Action Plan 13 and Circular 2.