CHINA Law and Practice Contributed by: Mei Zhang, DaHui Lawyers
9.2 Other Mechanisms In addition to the APA, Mainland China also employs an “Advance Tax Ruling” system, and together, these constitute a multi-faceted mechanism to ensure cer - tainty in international tax matters. “Advance Tax Ruling” refers to a service provided by tax authorities that is meant to increase tax certainty and mutual trust between tax authorities and enter - prises. For example, when a company submits an enquiry asking for clarification on the applicable tax laws and regulations for a specific and complex tax matter, the tax authorities provide written guidance based on current tax laws and regulations. Although there are currently no national-level regula - tions governing advance tax rulings, in recent years, many local tax authorities have experimented with providing personalised services for large enterprises. Consequently, many companies have applied for advance tax rulings on international tax matters (such as the application of DTA treatments).
year period stipulated in the DTA between China and Turkey. 8.3 Mandatory Binding Arbitration China has adopted mandatory binding arbitration on account of multilateral legal instruments such as the BEPS Multilateral Convention. MAPs remain China’s preferred method for resolving cross-border tax dis - putes. The main issues with these lie in their strict prerequisites, overt dependence on bilateral tax trea - ties, and the fact that a third-party arbitration tribunal is the final decision-making power over the country itself. Therefore, their application in practice is very limited and far from being universal. China began using APAs on a trial basis in the late 1990s. After 2009, China’s APA programme rapidly developed throughout the early 2010s and reached maturity in 2016. Key Regulatory Milestones • In 2016, the STA issued the Announcement of the State Taxation Administration on Matters Regard - ing Enhancing the Administration of Advance Pric - ing Arrangements, which implemented successful provisions from the BEPS project and streamlined the APA workflow. • In 2017, the STA issued the Announcement of the State Taxation Administration on Issuing the Administrative Measures for Special Tax Adjust - ment and Investigation and Mutual Agreement Procedures in order to incorporate measures rec - ommended by Action 14 of BEPS, which requires participating jurisdictions to increase their efficien - cy in resolving MAP disputes. • In July 2021, the Announcement of the State Taxa - tion Administration on Matters Regarding Appli - cation of the Simplified Procedures for Unilateral Advance Pricing Arrangements was released to help taxpayers obtain tax certainty on transfer pric - ing arrangements through the application assess - ment, negotiation and signing, and monitoring and implementation stages. 9. Dispute Prevention 9.1 Advance Pricing Agreements
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