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China's State Administration of Taxation and the U.S. Internal Revenue Service reached agreement in principle in September on their third bilateral advance pricing arrangement, Ernst & Young announced Oct. 18.
EY in its newsletter said the APA applicant is a "global technology group" with operations in North America, Europe and Asia, and that the APA covers a period of 10 years, including rollback years.
According to EY, which represented the global technology group, the APA covers sales of finished goods made by a group affiliate that is remunerated as a contract manufacturer, with another group affiliate owning the intangible property.
EY said the APA also covers intercompany management services provided by the U.S. group entity to its affiliates around the globe, including the group's Chinese entities.
"This case contemplated the transactional net margin method in determining the arm's-length compensation for the intercompany services and tangible goods transactions," EY said.
China and the United States concluded their second bilateral APA in November 2012. The taxpayer was Microsoft Corp. (21 Transfer Pricing Report...