The Case Analysis Of Transfer Pricing Occurring In AA Precise Machine (Guangzhou) Co.,Ltd.

AA Precise Machine (Guangzhou) Co. Ltd is a subsidiary of the multinational corporation of AA Group. It is controlled by its associated companies-AA Share Co. Ltd and AA Precise Machine(HK) Co. Ltd in the aspects of investment, senior management employees, production technology, purchasing of raw materials and products exporting. Furthermore, the imperfect tax collection and administration system of Chinese mainland provided the possibility for AA Group to take the advantage of associated transactions and pricing strategies to transfer the profit which shall be realized in AA Precise Machine (Guangzhou) Co. Ltd to AA Precise Machine (HK) Co. Ltd. and AA Share Co. Ltd which registered in British Virgin Island.Our tax authorities firstly certified the associated relationships of AA Precise Machine (Guangzhou) Co. Ltd and analyzed its operational financial situations, then analyzed its suspects of transfer pricing by steps. Secondly, we required AA Precise Machine (Guangzhou) Co. Ltd to provide the information concerning resale prices of its associated enterprises according to the suspects of transfer pricing exiting in AA Precise Machine (Guangzhou) Co. Ltd. Thirdly, we discover the evidences of transfer pricing of AA Precise Machine (Guangzhou) Co. Ltd by analyzing the information. Finally we could make the tax adjustments according to the principle of rationality.In general, the tax system of transfer pricing is not perfect, for instance, the lacking of a complete set of the relevant tax law, narrowing channels of collecting the information of the same industry, simple way of auditing methods, etc. All these needs the tax authorizes to take-necessary measurement, for instance, the application of the advancing pricing agreement, to further perfect the tax system of transfer pricing.