Research On Tax Risk Control Of Transfer Pricing For Cross-Border Affiliate

With the deepening of global economic globalization, the resources are constantly being allocated worldwide. Many multinational companies also continue to open up new overseas markets to seek more growing space and profits. When the multinational company expands constantly, it usually achieves Group’s strategic business objectives by transfer pricing. However, excessive transfer pricing will lead to the investigation of the tax authorities. In recent years, the LCD market developed rapidly in China, such as smart phones, tablet PCs, etc.. And a variety of foreign capital invest the LCD market, and it promotes China’s economic development. However, the influx of foreign capital will certainly involve transfer pricing issues of cross-border related enterprises.This paper uses case study method to analyze the cross-border business of CPT technology (Group) Co.,Ltd. Firstly, it elaborated the transfer pricing principles; Secondly, based on the analysis of specific transactions associated and function and risk with CPT technology companies, I chose a suitable transfer pricing method- Transactional Net Margin Method(Abbreviation, TNMM); Thirdly, I selected comparable companies through analysis of the target company, and selected the appropriate profit indexes under the premise of using TNMM:cost addition rate, operating margin and return on assets, in order to compare the target company with comparable companies; Fourthly, in order to make the results more reliable, I selected the financial data of comparable companies within three years, and then calculated their profit indexes respectively, and I defied the profit rang with "quantile range"; At last, according to the results of the comparison between the profit range and the profit rate of CPT technology company. Although these three indicators showed that CPT technology company’s profit margins are within the interquartile range, all of them are below the median. Therefore, I concluded that the related transactions of CPT technology companies are not fair, and there is a certain transfer pricing tax risk. Finally, according to the analysis of related transactions of CPT technology companies, I identified tax risk which may exist, and proposed appropriate measures. The CPT technology company is a representative company in the LCD industry. This article also wants to help LCD enterprises choose the transfer pricing methods and control tax risk within analysis of the transfer pricing of CPT technology companies.