Asia-Pacific Transfer Pricing Handbook

Chapter Six

Reporting Related Party Transactions in China

The Chinese government requires a taxpayer doing business in that country to report related party relationships to the State Administration of Taxation (SAT). The Chinese government developed these reporting forms pursuant to Corporate Income Tax Law Article 43. The SAT requires the taxpayer to submit nine specific documents to the tax authorities on an annual basis:

Form 1—Related Party Relationships

Form 2—Summary of Related Party Transactions

Form 3—Purchases and Sales

Form 4—Services

Form 5—Intangible Assets

Form 6—Fixed Assets

Form 7—Financing

Form 8—Outbound Investment

Form 9—Outbound Payments

Although the SAT requires extensive reporting of outbound investment and payments, the SAT fails to address the treatment of inbound investments and outbound payments. These forms, taken as a group, provide the SAT with data pertaining to transfer pricing, but certain forms, especially Form 8 and Form 9, have a broader purpose not necessarily connected with transfer pricing.

Enterprises that must submit the reporting forms to the SAT include foreign-based resident enterprises. The SAT imposes income taxes according to the taxpayer’s accounting books, which include nonresident enterprises that have permanent establishments in China. All of these enterprises are to attach and submit their reporting forms on an annual basis and pay corporate income taxes when they submit their annual reporting forms.

As a preliminary matter, the ...