The State Administration of Taxation (SAT) has urged the tax authorities at all levels to carry out general tax audits on large sum payments on service fees and royalties paid to non-residents, by issuing a directive on 29 July 2014 (Shui Zong Ban Fa [2014] No.146). Under Tax Office General Fa (2014) No 146 local tax offices are looking at service fees and royalties paid by Chinese companies to foreign parent companies. The tax authorities are also looking at location specific advantages. Where Chinese subsidiaries are considered to have benefited from location specific advantages a deemed profit is computed by the SAT on the basis of the profit split method.