Global Tax Summit 2014: Interview with: Rose Zhou, Head of Tax Services - Shanghai, Grant Thornton

1. Doing Business in China
What Tax Officers Need to Know
laws as they see fit. One location’s
experience cannot be applied to another
location.
How aggressive is the audit
environment in China? How does it
impact the tax function of
multinationals?
Interview with: Rose Zhou, Head of
Tax Services - Shanghai, Grant
Thornton
“China has its own transfer pricing
regulations, with characteristics that
differ between provinces,” pointed out
Rose Zhou, Head of Tax Services Shanghai, Grant Thornton. “Tax
Officers must be aware of how different
provinces interpret and practice the
laws, in order to avoid hefty penalties,”
she added.
Grant Thornton is attending the
upcoming marcus evans Global Tax
Summit 2014, taking place in Monte
Carlo, 19 - 20 May.
What do multinational companies
doing business in China need to
know about its transfer pricing
laws? What local knowledge is
required?
They need to understand that although
China follows the OECD principles, its
transfer pricing regulations are different
from international standards. For
example, common capital intensity
adjustments are not encouraged in
China, if not discouraged, so there are
differences in how those regulations are
applied.
As one country, the Chinese government can only issue one regulation.
However, as provinces differ in
population size and level of economic
development, the regulations are quite
general. This leaves room for local
authorities to interpret and practice the
Where is the Chinese economy
headed? What should multinational
companies plan for?
The Chinese economy will continue to
grow, although perhaps not as fast as
before. Considering the size of its
population, the market for consumer
goods will be especially prosperous.
China is ranked in the top three of the
most aggressive regions for transfer
pricing practice. The environment is
quite harsh, so managing transfer
pricing risk is critical.
Many entities have compliance requirements. If they fail to comply, they will
be subject to penalties, may be audited
and some transfer pricing adjustments
will occur. However, we also encourage
companies that do not have these
obligations to properly plan and manage
transfer pricing risk. Transfer pricing is
everywhere!
Whether they do cash repatriation,
business restructuring or set a new
policy to drive opportunities in a tax
model, they will find it important to
have the right transfer price set.
Otherwise, the new model will not
achieve its objectives and they will
eventually face a transfer pricing audit.
Does compliance mean more tax?
How could companies minimise
their tax burden?
To a certain extent, full compliance may
lead to more tax. The company needs to
ensure it is doing the right thing even
for the grey areas. However, compliance
also means less risk and fewer
penalties, thus saving the company
money. Companies may pay a bit more
but it is due tax that is supposed to be
paid. Additionally, they avoid penalties,
trouble and potential adjustments.
C o m p anie s ne e d to f ollo w the
regulations, how they change, plan
ahead and have the right internal team
to support business activities.
That is the best way
compliance.
of
achieving
What they should pay attention to are
changes in tax regulations. In the past,
tax benefits were granted to companies
located in certain places, depending on
where the government wanted to guide
investments to. Then benefits were
granted to certain types of entities, such
as those with very advanced
technologies.
The Chinese government guides the
economy through the invisible hand of
taxation. This means Tax Officers need
to read between the lines, identify what
the government is encouraging or
discouraging, and move their company
to the right track.
The Chinese
government
guides the
economy
through the
invisible hand
of taxation

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About the Global Tax Summit 2014
This unique forum will take place at Le Méridien Beach Plaza Monte Carlo, Europe,
19 - 20 May 2014. Offering much more than any conference, exhibition or trade
show, this exclusive meeting will bring together esteemed industry thought leaders
and solution providers to a highly focused and interactive networking event.
www.taxsummit.com
Contact
Please note that the Summit is a
closed
number
business
of
event
and
participants
the
strictly
limited.
Sarin Kouyoumdjian-Gurunlian, Press Manager, marcus evans, Summits Division
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About Grant Thornton
Grant Thornton is one of the world’s leading organisations that provide assurance, tax and advisory services. It operates globally in
more than 100 countries. Grant Thornton has a strong foothold in China with more than 2,000 professionals located in 17 major
business hubs. With a headcount of around 300, the national tax practice of Grant Thornton China provides one-stop-shop tax and
business solutions that serves the entire life cycle of a business, from investment structuring, company set-up, tax compliance,
supply chain planning, cash repatriation, to exit plan.
www.grantthornton.com
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To view the web version of this interview, please click here: www.taxsummit.com/RoseZhou