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Chinese Tax Official Urges Caution in Assigning Pandemic Losses

March 18, 2021, 5:21 PM

Multinationals should carefully consider the commercial rational for adjusting intra-company pricing arrangements as a result of the Covid-19 pandemic, a Chinese tax official warned Thursday.

Companies that reallocate losses to entities designated as a limited risk distributors are courting trouble with national tax authorities, Yan Xiong, deputy director-general of the international taxation department in China’s State Taxation Administration, told a UN webinar on COVID-19’s impact on transfer pricing. In arm’s length transfer-pricing arrangements, limited risk companies—which take on low-risk activities and assume little or no financial risk—aren’t typically allowed to take on large losses.

  • “Concerns may arise when before ...