Income Tax Advance Pricing System

With the continuous opening-up of China toward the outside world, especially after its entry into WTO, more and more multinationals will come to China for business operation as attracted by the huge potential market here. On one hand, these foreign investment enterprises ("FIE") bring in advanced management experience, personnel and technology and make up for the inadequate home investment capital; on the other hand, some FIEs aiming at the maximum profitability and the minimum tax burden, would seek for various illegal interests in an open way of Transfer Pricing ("TP") .Nowadays, tax authorities deals with TP with many different methods, but traditional transfer pricing methodology exposes a lot of disadvantages. Therefore, with the development of levy and management in international tax, a new system—Advance Pricing Agreements ("APA") appears. APA as a new method to deal with TP, shows obvious advantages.The author systematically analyse the current situation of transfer pricing for FIEs to avoid tax burden, then point out the main method for government to control—tax system for TP. Raise system for APA based on the introduction of traditional adjustment methods of TP, Systemically and deeply research the basic theory of APA. Finally, on the basis of in-deep study on system for APA abroad, realize the successful experiences and analyse the problems existing in the system for APA in China at present combined with Chinese reality. Then, point out the Countermeasures and suggestions in order to perfect system for APA in China, protect China's interests and promote the normal communication among countries all over the world.Made up of Introduction and four chapters.In Introduction, the author elaborates the reason for subject selection, the theoretical and realistic meaning of the subject.Chapter One .Based on the main method of TP for FIEs to avoid tax burden, elaborates the characteristics and research the reason, then point out that we do need to control tax avoidance by the means of TP. Chapter Two .Introduce traditional controlled measures of TP—tax system for TP first, and then the system for APA. Stress the origin, development and the basic theory.Chapter Three .Analyse the international current situation of system for APA, then point out experiences and enlightenments of system for APA abroad in order to apply them to the establishment of it in China.Chapter Four .Discuss the practicability of system for APA in our country. First, analyse the necessity and feasibility. Second, dissect the problems existing and the current situation for China to practice system for APA. At last, point out the Countermeasures and suggestions.