The Shenzhen Customs Authority and Shenzhen Taxation Bureau have jointly issued Circular No. 62 of 18 May 2022 on matters regarding the implementation of a mechanism for the collaborative (coordinated) management of transfer pricing for imported goods from related parties. The mechanism established by the Circular is meant to alleviate transfer pricing issues for enterprises importing goods from related parties, including issues of effective double taxation. Transfer pricing on imports often results in double taxation where the customs authority seeks an increase in the import price, increasing import duties and VAT, while the tax authority seeks a reduction in price, reducing deductions and increasing income tax. Because these are two independent authorities, an enterprise may be subject to both upward and downward adjustments on their related party imports.
Source Orbitax
