Research On Settlement Mechanism Of Transfer Pricing Disputes

With the accelerating the process of the economic globalization, transnationalcorporations’ business is also developing and expanding rapidly. For its economicstrategic target and profit maximization, transnational corporations set up their ownsubsidiaries and branch offices in different countries and make deals betweenaffiliated enterprises which result in transfer pricing disputes more serious.Therefore, transfer pricing disputes become the most frequent problems in theinternational tax field and caused highly attention. So these countries prevent thetax avoidance and evasion behaviors between affiliated enterprises caused bytransfer pricing through legislation so that they can protect their taxing power.However, because of the complexity and internationality of transfer pricing, it isdifficult to resolve the transfer pricing disputes with domestic law. Onlyinternational cooperation can thoroughly solve the transfer pricing disputes.Nowadays, the countries resolve the transfer pricing disputes with two methods.On the one hand, transfer pricing disputes is adjusted by domestic law. On the otherhand, transfer pricing disputes is resolved by international cooperations includingmutual agreement procedure, international tax arbitration procedure and advancepricing arrangement. Domestic law can not resolve the double taxation issues so thatthe country’s tax authority should solve the issues through mutual agreement procedure. International organizations and international tax law experts start toresearch international tax arbitration procedure which is used as a supplement ofmutual agreement procedure which has its inherent defects and advanced pricingarrangement which is used to avoid the occurrence of transfer pricing disputes.These procedures constitute the transfer pricing disputes settlement mechanism. Toperfect transfer pricing dispute settlement mechanism can resolve thoroughlytransfer pricing disputes so as to protect the countries’ tax revenue jurisdiction andtax base, to prevent the affiliated enterprise from the dual taxation, to ensure theother enterprises’ tax equity right and to maintain the effective operation of marketeconomy.The article studies on the settlement mechanism of transfer pricing disputesform the perspective of international law. First of all, the author briefly introducestransfer pricing disputes. Then the author introduces, evaluates and puts forward theimprovement suggestions on the mutual agreement procedure, international taxarbitration procedure and advance pricing arrangement respectively. At last, theauthor researches and puts forward some perfect proposals on transfer pricingdisputes settlement mechanism in China.