On 28 November 2019 the OECD published a stage 1 peer review report commenting on China’s compliance with the minimum standard on tax dispute resolution under Action 14 of the project on base erosion and profit shifting (BEPS). 

The report notes that China has concluded more than 100 tax treaties all of which include a provision relating to the mutual agreement procedure (MAP).

China has significant experience with negotiating MAP cases and more than 110 MAP cases were in progress at 31 December 2018. The report notes that China complies with most of the elements of the minimum standard under action 14 of BEPS and is aiming to make further improvements where necessary.

The peer review report comments that the MAP article in China’s tax treaties is generally in line with the relevant article of the OECD Model. The report notes however that almost 10% of China’s tax treaties do not include a provision for the MAP to be implemented regardless of any time limits in domestic law; or any provision setting a time limit for making transfer pricing adjustments.

The report notes that China has signed the multilateral instrument (MLI) to introduce tax treaty related BEPS provisions into many of its tax treaties and this should help to further align the treaties with the requirements under the minimum standard. In the case of treaties not covered by the MLI China intends to update its tax treaties through bilateral negotiations with treaty partners, giving priority to jurisdictions with closer economic ties and pending MAP cases with China.

The peer review report notes that China is in line with the BEPS Action 14 minimum standard in relation to the prevention of tax disputes and has a bilateral advance pricing agreement (APA) programme that also allows requests for roll-back of bilateral APAs.

China also meets some of the requirements on availability and access to the MAP but the report notes that there is no documented bilateral consultation or notification process for cases where the MAP request is not considered to be justified. There is however clear guidance on the availability of MAP and the practical procedures involved and China also meets the minimum standard on the implementation and monitoring of MAP agreements.

Implementation of measures to improve compliance with BEPS Action 14 will be examined in the stage 2 peer reviews.