Analysis Of Multinational Transfer Pricing Based On The Instance Of The Wholly Foreign-owned Shipping Companies

The development of Multinational Corporation (MNC) brought maximal transformation to international trade. It is estimated that about 50% out of international trades were occurred among subsidiaries of MNC. This kind of "intra-firm trade" and transfer pricing managed by parent company that is major conduct for international taxation avoidance purpose, which causes great impact to tax revenues of the host countries in which MNC operate. Obviously, transfer pricing becomes one of highlights and topical issue of New Corporate Income Tax. Along with further speed up growth of business globalization, we can foresee, transfer pricing will continue to maintain its important position in both MNC and tax Bureau.The whole context is divided into four chapters. The first chapter introduces transfer pricing in general. Transfer pricing is the pricing which adopt for trade between subsidiaries or parent company and subsidiary of MNC. It originated in internal trade in goods and services. The main incentive of MNC to adopt transfer pricing that is to reduce the overall taxation. Even sometimes its incentive is not for taxation avoidance, but rather for seeking business management strategy. However, its behavior results in evading taxation obligation, which is a non-tax avoidance motive.The second chapter introduces regulation and difference of five common transfer pricing methodologies for China and "Organization for Economic Cooperation and Development(OECD)". MNC generally uses five kinds of transfer pricing methodologies. Three kinds of transfer pricing methodologies transaction-based: comparable uncontrolled price method, resale price method, cost plus method. Two kinds of transfer pricing methodologies profit-based: transaction net profit method, profit split method.To adopt which transfer pricing methodology will result in variant industries and business model. The third chapter takes foreign shipping company as sample research. Using its specific business model as example to explicate intention of thesis on how to ascertain transfer pricing of foreign shipping company? Marine is classified as encouraged industry in China. After its accession to the WTO, China had abolished some restrictions as well as provided very favorable condition with permissive access to China for foreign shipping company. In detailed analysis of foreign shipping company in related transaction on the basis of function, risk and type of related transaction, choose appropriate transfer pricing methodology which is applicable for it.In order to ensure group profit maximization as well as achieve minimum of taxation obligation at the international level for MNC, they used to take advantage of internal control and manipulate transfer pricing which resulting in international tax avoidance. To investigate strictly transfer pricing has been become one of important work for SAT. New EIT regulation formulates requirement for rationality of transfer pricing and documentation submission which inhibits taxation avoidance of transfer pricing. In the practice of transfer pricing investigation, finally, to propose tax authorities at various levels that should standardize operations, and constantly improve the working mechanism of the anti-tax avoidance.