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Royalty related taxes

Company A is a Japanese-invested manufacturing enterprise set up in Guangdong Province, mainly engaged in the production of auto parts. Company A imports major parts from Japanese parent company by way of ordinary trade. In September, 2015, the port customs issued the "Notice of price challenge" to Company A, in which the declared price of an imported parts in that month was questioned.

After issued the "Notice of price challenge", the port customs required Company A to submit a series of financial documents, and transferred the case to the in-charge customs authority of Company A for further handling. The in-charge customs authority reviewed the financial documents of Company A, then questioned that the technology transfer fees paid by Company A to Japanese parent company should be included in the duty-paid value of the imported parts, and thus Company A should declare import taxes.


Our services:
  • Through the interview and discussion with the in-charge person of Company A and the examination of relevant documents, we learned the essence of technology transfer fees.
  • From the perspective of customs regulations, we analyzed whether the technology transfer fees constituted the taxable conditions.
  • Based on the essence of technology transfer fees, we analyzed the expenses that constitute the taxable conditions and the most favorable tax allocation plan, and prepared the relevant application forms and supporting materials.
  • We assisted Company A to negotiate with the in-charge customs authority, and try for the most favorable tax allocation plan. In the meanwhile, we tried for exemption of penalty and lower period of pursuing the collection of tax.
 Achievements:

With repeated negotiations and additional supporting documents, the in-charge customs authority eventually accepted our explanation documents and application, approved that Company A could pay the overdue tax according to the tax allocation plan we proposed. In addition, the overdue tax period was only dated back to the past one year and the fine was finally exempted.

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