China and Japan signed the Bilateral Advance Pricing Agreement

China and Japan has signed the first Bilateral Advance Pricing Agreement ("BAPA") in May. Advance Pricing Agreement is an arrangement between the taxpayers and tax bureau which states the method for determining and calculating the transfer pricing for cross-border related party transactions of Multinational Corporations ("MNCs"). The arrangement is developed to solve the complicated transfer pricing problem aroused in cross-border MNCs trading. The BAPA is developed and extended from the original pricing method - transfer pricing audit which resulted in high investigation cost for tax bureau and high compliance cost for taxpayers. The establishment of BAPA can reduce such costs and avoid double taxation between the two countries.

The negotiation and signing process of BAPA usually consist of 3 steps:
1. Application - MNCs are required to apply to tax bureaus in China and in another country that has engaged in the agreement;
2. Negotiation - tax bureaus in both countries will negotiate according to tax agreement; and
3. Signature of the agreement - after obtaining the signature of agreement of both tax bureaus, China tax bureau will sign the BAPA with the MNCs.

中日兩國稅務機關於5月中旬在北京正式簽署了我國第一個雙邊預約定價安排(Bi1ateral Advance Pricing Agreement，簡稱BAPA)。預約定價是稅務部門與納稅人之間通過簽訂協定或安排的形式，對納稅人在未來一定時期內關聯交易的定價方法及利潤水平等相關事宜事先約定一系列標準，以解決跨國關聯交易中複雜的轉讓定價問題。它是轉讓定價稅制的發展和延伸，在其產生之前，轉讓定價稅收管理主要採用事後調查審計的模式，這種模式帶來的最大難題是稅務機關的調查成本和納稅人的遵從成本較高。而BAPA的簽署帶來了跨國企業經營的確定性，可以降低被稅務機關實施轉讓定價調查的風險，減少稅收遵從成本，也有利於消除國際雙重徵稅。

雙邊預約定價安排的談簽通常需要三大步驟：一是申請，跨國企業須同時向我國和另一協定國家稅務主管當局提出正式申請；二是談判，雙方稅務主管當局根據稅收協定相互協商程式條款舉行談判；三是簽字，雙方稅務主管當局正式簽署安排，根據安排的有關規定，我國主管稅務機關與企業簽署預約定價確認協定。