Audit Defense and Documentation in China

The Situation

A Japanese manufacturing MNE whose Chinese subsidiaries were scrutinized by the tax authorities retained NERA to evaluate its transfer pricing policy and bring its related-party transactions into compliance with Chinese regulations.

NERA's Role

After reviewing the client's business, NERA conducted a thorough benchmarking study to determine the arm's length remuneration for various transactions. On behalf of the client, NERA entered into discussions with local tax bureaus in different districts of China and achieved resolutions acceptable to both the client and the tax bureaus. To further reduce ongoing tax risks, NERA assisted in preparing the Chinese subsidiaries' contemporaneous documentation in compliance with the applicable regulations based on the analytical method developed during the negotiations with tax authorities.