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Abstract

As a relative latecomer to the global transfer pricing regime, China’s growing economic presence on the world stage is accompanied by the implementation of its domestic transfer pricing principles. While in favour of the European Union’s view on the prospects of OECD BEPS Action plan, China’s emphasis on its status as a developing country and a long-lasting tradition of focus on government revenue collection means that the country’s transfer pricing regime is not always consistent with the OECD guidelines. As China progresses towards a true market economy, the SAT introduced Bulletin 6 in 2017 as another step towards incorporating OECD transfer pricing guidelines into its domestic regime. This article explores the possible legal significance of this regulation and argues that the implementation of Bulletin 6 indicates China’s dedication to introducing transfer pricing principles compatible with the OECD guidelines. The DEMPEP analysis also exemplifies China’s innovative approach in addressing factors unique to its domestic market. In the context of a centralised political system, the effectiveness of Bulletin 6 as a shield for taxpayers against aggressive government tax collection power remains to be seen, although there are reasons to remain positive and expect further improvements in China’s tax administration.

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