SAT Clarifies Corporate Tax Deduction For Shared Service Among Related Parties

; posted on
June 14th, 2018

The State Administration of Taxation issued a Bulletin (SAT Gong Gao [2018] No.28) to clarify what kind of accounting documents may be used for corporate tax deduction purpose. This Bulletin will come into force on July 1, 2018.

Tax Treatment of Shared Service Subject to VAT

Under Art.18 of the Bulletin, it is provided in the first paragraph that under a cost sharing agreement of services subject to value added tax (including shared among related parties), an enterprise should assume its cost is aligned with the arm’s length principle. The VAT invoice of such service and corresponding cost sharing agreement should jointly act as accounting documents. Accordingly, in the second paragraph of this article it provides that for shared costs of services not covered by VAT, cost sharing agreements and documents other than the invoice should be used for accounting documents for tax deduction purpose.

Other Costs to Be Deducted

Both internal and external accounting documents may be used for corporate tax deduction purposes if corresponding invoices are issued in accordance with SAT standards.

Source: SAT China

Greater China Practice - 大中华区

TPA Global, one of the leading independent global transfer pricing services groups, introduces Greater China Practice | 大中华区 to satisfy the burgeoning demand for specialist transfer pricing services by Chinese multinationals with operations in Europe - as well as European multinationals with operations in China.

Copyright © 2018
Transfer Pricing Associates BV.
All rights reserved.
 

H.J.E. Wenckebachweg 210
1096 AS Amsterdam
T: +31 20 462 3530
E: info@tpa-global.com
I: www.tpa-global.com