What is the importance of inter-company agreements between overseas related parties and their China entities?

In previous years, Chinese tax authorities primarily focused on taxpayers’ transfer pricing issues with respect to their main business operations. However, authorities have recently been paying closer attention to taxpayers’ single related party transactions involving services and intangibles. When a taxpayer makes a payment to its outbound related party for services or intangibles, the inter-company agreement must be submitted to the relevant Chinese tax authority. Failure to comply with documentation requirements can trigger tax investigations.