Cost Contribution Arrangements: China and International Best Practice

Abstract

This paper addresses the tax treatment in China of a cost contribution arrangement (CCA) in the light of the treatments in a selection of other countries, with the objective of ascertaining whether the law and practice in China conforms to international best practice. The paper arises out of concerns aired by a group of representatives, each from a multinational enterprise (MNE), which operates in China, about the prevailing Chinese law and State Administration of Taxation (SAT) practice with respect to CCAs. These concerns were raised at the International Research Seminar: Joint Research Project on Taxation held in Beijing by the Chinese International Taxation Research Institute and the International Bureau of Fiscal Documentation on 2930 June 2005. The paper is intended primarily to provide an overview of various country practices in relation to CCAs as a basis for further discussion about the state of the relevant law and practice in China.