China: Advance pricing arrangement annual report for 2021

Statistical data of the APA from 2005 to 2021

Statistical data of the APA from 2005 to 2021

The Chinese tax authority on 21 November 2022 published the advance pricing arrangement (APA) annual report for 2021 which details the progress of the APA program in China, covering the statistical data of the APA from 2005 to 2021. According to the report:

  • The tax authority signed 20 APAs in 2021, including 9 unilateral APAs and 11 bilateral APAs, 16 of which were new agreements and 4 of which were renewals.
    • Among the 9 unilateral APAs signed in 2021, 7 were signed within 24 months. Among the 11 bilateral APAs signed in 2021, only 2 were signed within 24 months.
  • From 2005 to 2021, the tax authority signed 226 APAs in total, including 125 unilateral APAs and 101 bilateral APAs.
    • 178 APAs related to the manufacturing industry (accounting for 78.8% of the total signed APAs). 25 APAs related to the wholesale and retail industry (accounting for 11.1% of the total signed APAs). 
    • 189 APAs related to the transfer of the right to use or the ownership of tangible assets (accounting for 56.6% of all transaction types). 144 APAs involved the transfer of the right to use or ownership of intangibles and service transactions (accounting for 43.1% of all transaction types). There was also one new case involving related party financing transactions in 2021.
    • The transactional net margin method is still the most commonly used transfer pricing method in signed APAs, being used 225 times and accounting for 81.8% of all the applied transfer pricing methods.
  • In addition, 137 bilateral APAs and 14 unilateral APAs are in the pipeline (including in the intent phase and application phase). 

KPMG observation

The number of bilateral APA applications has increased each year. As more enterprises apply for APA, the tax authority has become more stringent in its review requirements and tends to prioritize APA requests with complete value chain analysis, innovative analysis methods, and sufficient quantitative analysis of intangible assets, cost savings and market premiums.

The efficiency of unilateral APA negotiations has been improved by the simplified procedure for unilateral APAs that was announced in July 2021. Read TaxNewsFlash

In addition, the tax authority is focusing on strengthening cross-departmental cooperation. For example, the Shenzhen Tax Bureau and Shenzhen Customs in May 2022 announced its intention to combine customs advance ruling and tax unilateral APA. Read TaxNewsFlash

For more information, contact the Global Leader of KPMG’s Global Transfer Pricing Services:

Komal Dhall |


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