Unified Enterprise Income Tax Law and its impact on transfer pricing

The recently enacted Unified Enterprise Income Tax Law governs the income tax treatment of domestic and foreign invested enterprises; strengthens transfer pricing administration; and devotes an entire chapter to anti-avoidance and transfer pricing. It permits cost sharing agreements with regard to shared services and the development of intangible property, and introduces general anti-avoidance, thin capitalization and controlled foreign corporation rules. This article analyses these changes and their potential impact on tax planning in China.