| Ever since the time our country set up Open and Attract/Bid for/Invite Investment Policy, a great deal of overseas investments swarms into China, to bring advanced technologies and management experience for our country, at same time, it also appears that the Tax Evasion Phenomena to be caused by the large numbers of foreign companies utilizing the Transfer Pricing in particular with Intangible Goods Transfer Pricing, and therefore result in tax base erosion in contemporary China and the reason for problems of International Tax Avoidance. Hereupon, the key points of this text is to investigate problems of International Tax Avoidance, according to international experience, to make suggestions to perfect the Tax Law Regulation of Intangible Goods Transfer Pricing concerned to multinational corporations in China.According to statistics of the Ministry of Commerce of the People's Republic of China, at the end of August 2004, there have been 494025 foreign-invested companies approved to establish, the actually utilized foreign capital amounted to$545.029 billion, with a total number of foreign-invested companies amount to 490,000, but more than half of the foreign-invested company were still making a loss, Su Xiaolu, Former Director of Anti-Avoidance of Taxation, State Administration of Taxation, believed that in large part of Multinational Enterprises were intend to make a loss for Avoidance of Taxation, the Avoidance of Taxation of Multinational Enterprises in china caused taxation loss more than RMB 30 billion, however Foreign Investors were intend to transfer profits and Avoidance of Taxation with Transfer Pricing, in particular of Intangible Goods Transfer Pricing.Recently, all countries around the world and International Organization concerned always pay high attentions to Transfer Pricing of Multinational Enterprise, and to coordinate these problems by International Tax Revenue, and signing the bilateral and multilateral tax agreement, and formulating the Domestic Transfer-Pricing Tax System to strengthen the regulation of Transfer-Pricing, then should tend to be consistency in the world. The Intangible Goods Transfer Pricing System means the basic principles, methods and measures concerned to the Intangible Goods Transfer Pricing, as well as some substantial rules and Procedural Rules concerned. US was the first countries in the world to formulate the Legal System of Taxation of Associated Enterprises and Transfer Pricing methodology, and formulating and promulgation "Detailed Rules for Implementation Article 482 of Internal Revenue Code (IRC) " to confirm basic principle should be abided for Transfer Pricing in 1968, and "Detailed Rules for Implementation of Internal Revenue Code (IRC)" to stipulate four methods aimed at Transfer Pricing in 1994, so to form a Intangible Goods Transfer Pricing System be provided with comparatively perfect maneuverability. In generally, the Regulations stipulated by OECD (Organization for Economic Co-operation and Development) on Intangible Goods Transfer Pricing are comparatively traditional relative to United States tax law, "Transfer Pricing Guidelines for Multinational Enterprises and Tax Administrations" has specific provisions for the Intangible Goods Transfer Pricing, to emphasize that the Arm's Length Pricing Principle is the same with regulation of Intangible Goods, the traditional "comparable uncontrolled Price method" and "Resale price method (RPM)" were recommended.The main differences between USA and OECD on Intangible Goods Transfer Pricing:A. Principle of Transfer Pricinga. The essential principle on Transfer Pricing was prescribed in "Internal Revenue Code", the Internal Transfer Price existence in Multinational Enterprise should be obeyed the Arm's Length Pricing Principle, otherwise, which should be regulated by Internal Revenue Service (IRS). There were no priorities existence in regulation methods, for the choice of method, the IRS should take the best method principle, and this basic principle is also applicable to the Intangible Goods Transfer Pricing. So both principles should be abided by : the Arm's Length Pricing and best method principle.b. the Regulations stipulated by OECD (Organization for Economic Co-operation and Development) on Intangible Goods Transfer Pricing are comparatively traditional relative to United States tax law, and "Transfer Pricing Guidelines" emphasized that the Arm's Length Pricing Principle is the same with regulation of Intangible Goods.It is obvious that OECD put great efforts to especially formulated the method of Transfer Pricing to ensure the Arm's Length Pricing Principle to be strictly abided by, nevertheless the best method principle of USA seems to easily realize the fairness in essential.B. Methods of Transfer Pricinga. "Detailed Rules for Implementation of Internal Revenue Code (IRC)" of the USA stipulated four methods aimed at Transfer Pricing in 1994, namely "comparable uncontrolled transaction (CUT)" , "Comparable Profit Method (CPM)", "Profit Split (PS)" and unspecified methods, and there were no priorities existence in the four methods, at the same time the best method principle is also applied. Otherwise, for the Pricing method of Intangible Goods, "Detailed Rules for Implementation of Internal Revenue Code (IRC) " of the USA in 1994 made a different definition , the first circumstance was involved in price of admission and sale of Intangible Goods, and should to be confirmed, the second circumstance was cost sharing arrangement. USA and OECD are in consistent in this point.b. The methods for OECD on Intangible Goods Transfer Pricing should be applied in order. Though the opinion of OECD on "Profit Split (PS)" become flexible, but only for stipulation, and no comparability, so which are difficultly applied to the circumstances of traditional transaction methods and Transactional Net Margin Methods, but can be applied to the "Profit Split (PS)". The "Transfer Pricing Guidelines" of OECD adopted the two methods aimed at the regulations of Intangible Goods which were appropriate for the Arm's Length Pricing Principle. First, the Comparable Transaction could be discovered in external market, so suggestion to keep on the traditional transaction methods, such as comparable uncontrolled transaction (CUT) and so on. Second adopted the cost allocation if the technology was be developed by Associated Enterprise. It is obvious that there are divergent between the USA and OECD on the detailed pricing methods and orders.While the legislation of Intangible Goods Transfer Pricing system in our country badly lags behind, and trials of the first Tax Legislation on Transfer Pricing were carried out in Shengzhen, Shenzhen government promulgated the "Shenzhen SEZ, Administration of Taxation on Business Transactions Between Foreign Investment Enterprises and Affiliates Tentative Procedures" in November 1987, but its actual implementation results was not good. Our country started the legislation of Transfer Pricing to promulgate the "PRC, Foreign Investment Enterprise and Foreign Enterprise Income Tax Law" in April 1991, so the Administrations of Taxation can supervise, manage, control and regulate the Transfer Pricing of the Associated Enterprises of Multinational Enterprises in our country. There were material regulations for taxation treatment of Associated Enterprises as prescribed from Article 52 to Article 58 of the "PRC, Foreign Investment Enterprise and Foreign Enterprise Income Tax Law Implementing Rules" (hereinafter referred to as the "Implementing Rules") promulgated by the State Council in Junel991, and to define the Associated Enterprise, the trade transaction of independent enterprise, the requirement to provide files, and regulation methods of Transfer Pricing concerned to purchase and sales transactions between an enterprise and its associated enterprises, Capital Mobilization, providing labor service and transfer of assets, providing Asset Ownership etc. The taxation and "Implementing Rules" as be mention above put into effect on January 1, 1991, so indicating the taxation of Transfer Pricing to be formally set up. The "Tax Administration Law" was adopted by National People's Congress in September 4, 1992, otherwise, the Article 24 and the Article 36 to Article 41 of the "Detailed Rules for the Implementation of the Law of the P.R. China Concerning Tax Administration and Collection", had specific provisions for taxation administration of Associated Enterprise, to improve the Taxation Management for Transfer Pricing in China.The "State Administration of Taxation on the Tax Administration of Measures on Business Transactions Between Affiliated Enterprises", and " Notice of the State Administration of Taxation on several Specific Issues concerning Implementation of the Tax Administration of Measures on Business Transactions Between Affiliated Enterprises", were promulgated by the State Administration of Taxation in October 1992. The "Administration of Tax on Business Transactions Between Affiliated Enterprises Rules ( for Trial Implementation) " (hereinafter referred to as the Administrative Rule ) was promulgated by the State Administration of Taxation in April 1998, which concerned the definition of relationship between Affiliated Enterprises and declaration of business transaction, definition of amount of money traded between Affiliated Enterprises, identifying of auditing object, implement of audit and investigation, quotation by enterprise and identifying of concerned quotation by taxation department, choice of regulation method, implement of taxation regulation, reconsideration and lawsuit, filing and management of archives. In order to regulate and guide the work of foreign-related tax audit, so the State Administration of Taxation stipulated the "Procedures for Foreign-related Tax Audit", and promulgated on first half year 1999, which included the work flow of tax audit, process of audit, basic technology and requirement, to strongly guide the practical work. The "Implementing Rules for Negotiated Pricing for the Transactions among Associated Enterprises (for Trial Implementation" was promulgated by State Administration of Taxation September 3, 2004, to fix negotiated pricing rules, reducing regional difference, improvement transparentness and preventiveness, to save administrative cost of Administration Department, to enough gain advantages of negotiated pricing.Owing to the legislation of transfer pricing was relatively lat, only several provisions of Intangible Goods Transfer Pricing, and no taxation of Intangible Goods Transfer Pricing at all. In view of the provisions in legislation of OECD and USA as representative of OECD Member Countries, the taxation of intangible goods transfer pricing should be a system, including the provisions for standard of intangible goods, regulation principle, pricing method, audit process, periodical regulation, confirmation Comparableness etc. it is obvious that our country does not divide the provisions of intangible goods transfer pricing from the tangible goods transfer pricing, the most important regulation methods are still four regulation methods of transfer pricing as prescribed in Article 28 of the "Administrative Rule", namely comparable uncontrolled price method, resale price method, cost-plus method and the fourth methods without detailed interpretations. From the formalness of legislation, the taxation of intangible goods transfer pricing is not actual independence in our country, which is mixed in the whole transfer pricing provisions. So the independence intangible goods transfer pricing system is not existence in our country, and there are some problems, such as, the definition range of intangible goods is very narrow, the "Arm's Length Pricing Principle" is not properly regulated, the intangible goods is not defined etc.So the important contents of this text is to study some problems aimed to intangible goods transfer pricing, to draw on the international experience, and making suggestions for perfection of the taxation of intangible goods transfer pricing in our country.A. To stipulate the independent and integrate the Intangible Goods Transfer Pricing law.B. To clearly define the Intangible Goods.C. To make the particular regulations be applicable to the Arm's Length Pricing Principle.D. To fix the appropriate Pricing Methods.E. To perfect the Advance Pricing Agreement.The paper is divided into four parts. Part I introduces the Intangible Goods Transfer Pricing System and formulate the interrelated concepts. Part II introduces the systems and methods of Foreign Transfer Pricing Intangible Goods. Part III clears up the legislative status quo of tax system of Intangible Goods Transfer Pricing in China. Part IV makes suggestions to perfect the Intangible Goods Transfer Pricing System in China, including formulating the Intangible Goods Transfer Pricing law of independence and wholeness, defining bounding of Intangible Goods, stipulating the special rules applicable to "Arm's Length Principle", formulating the appropriate pricing methods, perfecting the Advance Pricing Arrangement System in China.
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