China: Advance pricing arrangement annual report for 2022

Statistical data for advance pricing arrangements (APAs) in China from 2005 to 2022

Statistical data for advance pricing arrangements (APAs) in China from 2005 to 2022

The State Taxation Administration (STA) on 19 December 2023 published the 2022 APA Annual Report covering the statistical data for advance pricing arrangements (APAs) in China from 2005 to 2022. According to the report, the Chinese tax authorities had signed a total of 116 bilateral APAs and 144 unilateral APAs by the end of 2022.


  • Upward trend on the number of signed APAs: The Chinese tax authorities signed a total of 34 APAs in 2022. Among them, 16 out of 19 unilateral APAs and 8 out of 15 bilateral APAs were signed for the first time. The total number of signed APAs is showing an upward trend. By phase, 34 unilateral APAs and 145 bilateral APAs are in the intent phase and application phase.
  • Main industry covered by signed APAs is still the manufacturing industry, and wholesale and retail industries related APAs are growing: 203 APAs are related to the manufacturing industry, accounting for 78.1% of the total 260 signed APAs. In addition, there are an increasing number of enterprises signing the APA which operates in the wholesale and retail industry (i.e., 27 cases accounting for 10.4% of the signed APAs from 2005 to 2022).
  • APAs for related party transactions still focused on tangible asset transactions, but the proportion of other transactions is also increasing: 213 signed APAs from 2005 to 2022 are related to the transfer of the right to use or the ownership of tangible assets, accounting for 55.5% of all transaction types (as some APAs involve multiple types of related party transactions, the total number of related party transactions is greater than the number of APAs). Other types of related-party transactions have shown an upward trend in recent years. For example, 167 signed APAs involve the transfer of the right to use or ownership of intangibles, and service transactions, accounting for 43.5%, and four cases involve related-party financing transactions.
  • APA negotiation efficiency improved: Among the 19 unilateral APAs signed in 2022, all were signed within 24 months. With the announcement of the simplified procedures for unilateral APA, it is expected that the efficiency of unilateral APA negotiations could be further improved. In 2022, among the newly signed 15 bilateral APAs, 10 of them have been negotiated and signed within 24 months, and five of them were completed within more than 24 months. The completion of a bilateral APA depends on many factors, including but not limited to the quality of the taxpayer's submitted documents, the complexity of the case, the timing of the taxpayer's filing, and the willingness of both tax authorities to move forward with the case.
  • The transaction net margin method is still the most used transfer pricing method applied by APAs: The transactional net margin method is still the most used transfer pricing method in signed APAs from 2005 to 2022, being used 258 times and accounting for 83.5%. In addition, the Chinese tax authorities have also actively tried to use other methods to reasonably evaluate the important contributions of both parties in value creation, as well as special factors such as market premiums and cost savings.

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