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Understanding Transfer Pricing Practices In China

On 7 September 2014, students in the Transfer Pricing class of SIM University's Master of Taxation programme heard a first-hand account of the practice of transfer pricing in China from Ms Evelyn Lim, International Tax Director at BDO Tax Advisory Pte Ltd.

Ms Lim drew on her extensive experience in Beijing, China, advising both local and international clients. She explained that some of the difficulties of transfer pricing in China arose because of the rather independent nature of the local provincial tax offices. She shared that the old saying 天高皇帝远 (literally translated as "the sky is high and the emperor is far away") truly applies to transfer pricing practice in China – even if one had the backing of a ruling from Beijing, as getting that ruling implemented by the local authorities is another matter altogether. As a matter of practical reality, 关系, or guanxi, still carried weight in China, although things are beginning to change and a more principled-based approach is emerging.

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