The Chinese and Japanese tax administrations signed Bilateral Advance Pricing Agreement recently in Beijing to start their cooperation on fighting against tax evasion and avoiding dual taxation.

This move can facilitate the information exchanges on products and labor between the two countries so as to prevent tax tricks by businesses, experts say.

Official with the State Administration of Taxation said the 480,000 foreign funded enterprises in China reporting more than 120 billion losses a year took over 30 billion yuan away. But many think even this figure, albeit massive, is too conservative.

Local tax agencies in China have reached some 100 advance pricing agreements with resident foreign funded enterprises since the first such arrangement was made in Xiamen between the tax administration and a Taiwan-invested company. However, these unilateral arrangements play a limited role in preventing evading tax payment.

The official explained that BAPA brought certainty to business operation of multinationals as it reduced risks of being involved into investigations into transfer pricing, a practice used by foreign enterprises to avoid tax payment. It will also help to minimize the possibility of dual taxation.

By People's Daily Online