What are the requirements for transfer pricing in China?

The current system is largely based on the guidelines of OECD. The newest update on transfer pricing is the one promulgated in 2009 by the State Administration of Tax.

The Chinese transfer pricing system is based on the arm’s length principle. All the transactions made between the foreign headquarter and the Chinese subsidiary, which are deemed as related parties under Chinese law, must be conducted in accordance to this principle. Thus, the system requires taxpayers to prepare and retain detailed transfer pricing documentation to prove that the transactions are made at arm’s length.