Legal Regulation Of Tax Avoidance On Transfer Pricing For Affiliated Companies

Paying tax in accordance with law is the bounded duty of every citizen and enterprise,but affiliated enterprises seek maximum tax reduction or fail to assume originally due tax obligations by means of transfer pricing.At present,affiliated enterprises in China execute transfer pricing in a covert and complex way,which has become the main means of tax avoidance for affiliated enterprises.Thus,the legal regulation of affiliated enterprises' tax avoidance bv means of transfer pricing should be reinforced in China.It can be started from three aspects:legislation,administration and judicature.Legislatively,imperfect details of each chapter in the law of transfer pricing are to be supplemented;administratively,restrictions on excessive discretionary power of tax authorities are to be made;and judicially,professional trial organs are to be set up to safeguard the rights and interests of all parties.At the same time,the legal system on advance pricing agreement and cost-sharing agreement should be improved,increasing its practicability.The effectiveness of legal regulations on affiliated enterprises' tax avoidance by means of transfer pricing should be enhanced so as to realize the systematic construction of the legal system on transfer pricing.This dissertation is divided into six parts,which are presented in turn as below:Chapter One,Introduction.It mainly elaborates the significance of the topic selection,research status at home and abroad,case analysis,research methods adopted,innovations and shortcomings,and so on.Problems in transfer pricing are concluded through a tortuous lawsuit with a series of frustrations between Zhejiang Shenzhou Real Estate Company and tax authorities.Hence,it is necessary to establish a more rigorous tax system on transfer pricing.Chapter Two,the theoretical analysis of regulating affiliated enterprises' tax avoidance by means of transfer pricing.The study on legal regulation of tax avoidance by means of transfer pricing in foreign countries started early.There are perfect tax system on transfer pricing in many countries;while the study on legal regulation of tax avoidance by means of transfer pricing started late in China,the speed of law updating is fast with much application research and little theoretical research.However,the research on legal regulation of tax avoidance by means of transfer pricing is in a state of lag at home and abroad,lagging behind the economic development of various countries.At the same time,in terms of defining relevant concepts,the scope to put forward to the pamper imagination of three-level structure defined by affiliated enterprises and to confirm enterprises' tax avoidance by means of transfer pricing should be narrowed down.Furthermore,seven methods of tax avoidance by means of transfer pricing that are in common use by affiliated enterprises are introduced.It is suggested that the analysis of the legality and rationality of legal regulation of affiliated enterprises' tax avoidance by means of transfer pricing should be carried out.Chapter Three,the current situation and lacunae of the legal regulation of affiliated enterprises'tax avoidance by means of transfer pricing in China.It refers to the legal texts that regulates tax avoidance by means of transfer pricing,sums up the stage results and lacunae of the legal regulation,find that there exists ambiguity in the definition of concepts,and there are still some shortcomings of advance pricing agreements in dealing with tax avoidance by means of transfer pricing,that is,little quantity and slow speed,uneven distribution of types,obvious gap in regional distribution,a long time cost from the formal application to arrangements made,remarkable industry gap,and dispute resolution method of singularity.The problems in cost-sharing agreements are as follows:i.e.,insufficient attention,the content without enough details,narrow application scope,and unclear operational guidelines and specifications.Besides,on the basis of the trial of such cases in judicial practice,China hasn't judicially played its due role in this field.Chapter Four,extraterritorial experience in legal regulation of tax avoidance by means of transfer pricing.In contrast to the imperfect tax system on transfer pricing in China,many practices of legal regulation of transfer pricing of foreign countries are worth learning and using for reference by legislature in China,for example,the application of information disclosure principle.At the same time,the advantages of Australian system on advance pricing and American design scheme of cost-sharing agreement are extracted.For example,Australia actively develops diversified APA products,implements risk assessment products of tax avoidance by means of transfer pricing,and reasonable APA procedures;the United States implements the connection of tracks between expected revenue and contribution rate in the cost-sharing agreement scheme,which can produce good regulatory effect in the field of intangible assets,etc.Moreover,the tendency of international cooperation and extraterritorial courts in the trial of cases of tax avoidance by means of transfer pricing is also explained.Chapter Five,suggestions on perfecting the legal regulation of affiliated enterprises' tax avoidance by means of transfer pricing.Some constructive suggestions are put forward on the basis of controversial points mentioned above.Firstly,the definition of affiliated enterprises' tax avoidance by means of transfer pricing should be standardized in China,the disclosure of information on enterprises' tax avoidance by transfer pricing should be regulated and standardized by establishing a database,so that the positive interaction between government and enterprises come into being to promote the development of APA;secondly,the method of utilizing the cost-sharing agreements to allocate indirect costs,which is used by developed countries should be drawn lessons from and professional institutions be set up to regulate the trial of transfer pricing cases;finally,international cooperation should be intensified by means of unblocked channels of tax information exchange,renewal of information on tax havens,and alike.The legal regulation of affiliated enterprises' tax avoidance by means of transfer pricing should be improved from a global perspective.Chapter Six,summary and outlook.