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The Action on Anti-Tax-Avoidance Accelerate again in China and the Notice on Anti-Tax-Avoidance Survey regarding the Payment of Large Sum of Fees to Overseas Issued
2014-November-14 Source: Newsgd.com
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On June 20, 2014, the State Administration of Taxation issued a notice on working well on the organization of tax revenue (ShuiZongFa No. [2014]78, hereinafter referred to as the "Text 78"), which emphasizes that anti-avoidance work should be strengthened in order to prevent the loss of tax revenue. A month later after Text 78 issued, the Notice on Anti-Tax-Avoidance Survey regarding the Payment of Large Sum of Fees to Overseas (ShuiZongBanFa No.[2014]146, hereinafter referred to as the "Text 146")is issued on July 30th,2014 in order to further promote the anti tax avoidance and to prevent enterprises from transferring the profits. The publishing of Text 146 launches the anti tax avoidance survey on pay the large sum of service fees and royalties. to the related party overseas.

According to Text 146, in general, the basis of the payment to the related party is to have the commercial nature which can be prove effectively to be its rationality ,if not, the payment will face difficulties. It is known that some local tax authority have started the investigation and begun to contact the sampled enterprises or announce the list of the sampled enterprises in its official website. Enterprises should pay attention to the notice issued by the competent tax authorities and to take appropriate action. However, regardless of whether they were in the survey list, enterprises should prepare the relevant documents which may prove fully commercial substance and its rationality of related transaction. If enterprise fails to make the transfer pricing policy or could not prove the commercial nature and its rationality of payment, it should take the initiative to review its current practice, find potential tax risks in a timely manner, and make appropriate corrections before the tax authority question.

(This information is provided by Lawyer Kelly Xie from Guangdong KaiTong Law Firm in friendship. It is not any legal opinion or legal grounds addressed to any organization or individual. For inquiry, please contact Kelly via email at Kelly_xie@ktlf.com.cn or by phone on 13926185641.)

Editor: Sunny
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