Research Into The Transfer Price Strategy Of Shenzhen Fongsoon Food Co. Ltd.

Globalization gives rise to numerous internal transactions within multinational companies as well as sizeable group companies. The topic of transfer pricing prompted by the inter-companies transactions has become a vigorously debated international issue. Through a study of the transfer pricing strategy adopted by SZ Fongsoon company, a foreign invested enterprise in Shenzhen, this paper takes a close look of the international mainstream transfer pricing methods adopted by foreign invested enterprise.From the perspective of foreign invested companies, this paper explains the concept of transfer pricing and the choice of transfer pricing methods, by referring to the independent arm's length principle and the respective regulations and international general practices. In addition, based on empirical evidence, this paper highlights certain issues relating to managing inter-companies transfer pricing.It shows in the paper that although profit maximization is essential, it is equally important to achieve the objective of setting an appropriate transfer price by simplifying the management of transfer pricing, minimizing the risk of tax adjustment, ensuring the price-setting process is transparent and the transfer price can be substantiated. The idea of an entity setting an appropriate transfer price is consistent with the national goal of establishing transfer pricing rules and regulations which are fair and effective.The promulgation of the Provisional Implementation for Special Tax Adjustments ("Implementation") is a milestone in the history of transfer pricing legislation. The implementation has made reference to international common practice, and has enhanced the rules and regulations of transfer pricing in China. With the market liberalization prompted by the WTO membership, China sees an influx of multinationals. The accelerated pace of examining the regulation governing the related party transfer pricing and tax collection of foreign invested entities, helps the National Tax Authority evaluates the nature and the risk of overseas tax evasion. This, in turn, has an enormous benefit to tax regulation.