Research On The International Comparison Of Advance Pricing Arrangement Of Multi-national Enterprises

Advance pricing arrangement(APA)is one kind of administrative approaches to avoid and solve the dispute on transfer pricing. It is one kind of prcedural arrangement of the tax authority and the tax-payers for the sake of solving the hidden dispute on transfer pricing. Because the superiority of this system, it has been developing quickly in the whole world in the short period of more than 20 years. The new"Enterprise Income Tax Law"that was put into force in Jan. 1st of 2008 has again established the lawful status of APA,the research on APA system has a reality meaning and science value. Having the law as the view angle, this thesis has discussed in depth the APA system in theory and practice. For the first time, it has systematically state the legal background, legal foundation and legal theoretical foundation of APA;in the research of practice,it has stated the current implement procedure of APA in our country and done the international comparison and references on 7 typical problems,brought up the suggestion on perfecting the legislation of APA implement procedure and brought up creatively the thoughts of perfecting APA legal system and building up APA legal service system.I. Theory Research on APA System and International Comparison:(I)Legal background of APATo do research on APA, we must first know the development process of transfer pricing and its legal system. Transfer pricing is a difficult problem of international taxation faced by the governments of all the countries. Multi-national enterprises use transfer pricing to avoid revenue not only overpass the revenue profit of the related countries but also damaged the fair international revenue environment. Because of this, all the countries have set up their legal system of transfer pricing administration.The initial legislation of transfer pricing was to endow the tax authoritys with the rights of transfer pricing adjustment. In 1915,Great Britain made the regulation first and then all the countries just followed. With the maturity of transfer pricing administration, the legislation content of it has become richer and richer and the principal of transfer pricing adjustment was established."Arm's length principal"was recognized gradually by all the countries. During the development process of the legislation of transfer pricing,the double taxation problem caused by transfer pricing has produced the series of systems of"corresponding adjustment and mutual agreement procedure","arbitration","compliance standards"etc.. All these systems are derived from the transfer pricing adjustment and"arm's length principal".They have formed the contents of transfer pricing administration.APA was not coming from nowhere but the product of the continuous perfection and development of the legal system of transfer pricing. The producing background of it is:the traditional transfer pricing administration system facing difficult situation has created the needs of the tax authority for APA. First,during the operation, the"arm's length principal"is facing all kinds of difficulties, the shortcoming of the traditional transfer pricing adjustment unveiled gradually. The administration cost of transfer pricing of the tax authority becomes higher and higher and the effect becomes weaker and weaker. Secondly, corresponding adjustment and mutual agreement procedure as well as arbitration cannot easily solve the double taxation problems. The second background:the strict requirements on transfer pricing compliance caused the needs of the multi-national enterprises for APA. The burden for declaration and reporting is increased, the sharpness of punishment and the reinforcement of auditing on transfer pricing all made the multi-national enterprises seek for prevention type of settling scheme. Third background: the benefit problem of each country caused by transfer pricing has caused the needs of the government of all the countries for APA.Under the circumstances of the above background, with its characteristics of lowering the administration cost, accelerating the settling of disputes, avoiding double taxation, lowering the tax risk and compliance cost of the multi-national enterprises and accelerating the international economic cooperation, APA has met the different needs of the tax authorities, the multi-national enterprises and the governments of all the countries and has been developed quickly in the whole world.(II)Legal foundation of APAThe process of all the countries in importing and developing of APA is also the process of the continuous development and perfection of APA legislation. The legal foundation of APA includes the legislation of all the countries, tax treaty and the APA guidelines in areas. This thesis has introduced the legislation of APA of China, Japan, U. S. A., Australia, Canada, England, Spain, Holland, France, Belgium, South Korea, Viet Nam and Singapore etc. countries and the bilateral tax treaty of APA .At the same time, it has also introduced the"OECD Guidelines","PATA Guidelines"and"European Union APA Guidelines". All these contents have formed the legal foundation of APA and have provided powerful legal guarantee for the development of APA.(III)Legal theoretical foundation of APAThe signing of APA through negotiation by the parties of tax authority and tax-payers and the deciding of transfer pricing problems of controlled transaction during certain period of time based on the above will easily cause misunderstanding of the people in thinking APA is the giving up of revenue rights. This thesis has discoursed upon the legal theoretical foundation of APA by using the theory of law creatively. First the legal relation of tax authority and tax-payers during APA:it is not civil legal relation but administrative legal relation;second, the legal status of APA:not the civil agreement between civil subjective but a kind of administrative approaches of transfer pricing;third, the essential of APA:not the giving up of public rights but the seeking of the public rights operators on searching the reasonable operating routes by way of it. 1. From the theory angle of"law element",as a legal principal in the administration of transfer pricing the"arm's length principal"has the factor of"free adjudication"; 2. From the practice angle, under many situations, the free adjudication of"arm's length principal"will be hard to master;3. On the problem of"how to use the free adjudication o'farm's length principal'and make the administration of transfer pricing towards equity and reasonable"APA has provided an effective communication route for both parties;4. Within APA, the communication of the tax authority and the tax-payers are based on the legal criterion of transfer pricing and done under the precondition of"arm's length principal"not the giving up of the revenue rights.II. The Research on APA Practice and the International Comparison and ReferenceThis thesis has done a direct and detailed introduction on the APA implement procedure of our country in illustration form. At the same time, it has aimed at the problems of information secrecy and usage, the organization structure and human resource guarantee problems, the equality of the applied object, the resource of the important information of APA, the requirement of document supply and the problem of falsity information, the difficult problems of APA caused by the changing of commercial environment, the balance problem of cost and profit and the international corporation and coordination etc. 7 big problems. Linked with the above problems, compared the related legislation and advanced methods of U. S. A., France, Holland, Spain, Germany, England, Japan, South Korea, Canada, Australia, Mexico and European Union, OECD and PATA etc., the author has brought up the suggestion for perfecting the implement procedure of APA in our country, the implement procedure legislation of APA is the core of APA legislation but not represent the whole. This thesis also brought up the basic framework of APA legislation and further brought up the suggestion for the perfection of APA legal system with the contents of APA legislation, legal execution, judicatory guarantee, legal monitoring and publicizing of legal system. At the same time, the author also brought up the thought of exerting the society function of APA lawyers and the building up of the legal service system of APA creatively.III. Research Methods and Purpose of WritingSince the creation of APA is only in a short period of more than 20 years, there is no comparatively matured system theory, the data and information obtained in the research domain is quite incomplete. Before writing this thesis, the writer has read and studied many work on transfer pricing and international taxation, collected the materials of all the countries and all international organizations on the legislation and practice of APA from the year 1987 to 2008,translated and published the thesis of foreign countries on APA and arranged and concluded all the data and translation, the process was very difficult. During the creation time of the thesis, the writer tried to use law as the view angle to discourse upon the system of APA. Based on large amount of valuable data, aimed at the international comparison and reference, the writer brought up the legislation suggestion with realistic meaning. We hope this thesis will be helpful for the perfection of APA legal system and the structure of APA legal service system of our country at present and in the future.