国税发[2004]118号

颁布日期：20040903 　实施日期：20040903 　颁布单位：国家税务总局

　　No. 118 [2004] of the State Administration of Taxation¹

　　The Administrations of State Taxes and the Administrations of Local Taxes of all provinces， autonomous² regions， municipalities directly under the Central Government and the cities under separate state planning：

　　The Implementing³ Rules for Negotiated Pricing for the Transactions Among Associated Enterprises （for Trial Implementation⁴） and the samples of its various documentations （see annexes⁵） are hereby printed and distributed to you， please carry them out accordingly. If you encounter any problem during the process of implementation， please report to the Department of International Taxation of the State Administration of Taxation in time so as to have them solved.

　　Annexes：

　　I. Minutes of Talks for Negotiated Pricing （omitted）

　　II. Notice on Formal Talk about Negotiated Pricing Arrangement （omitted）

　　III. Formal Written Application for Negotiated Pricing Arrangement （omitted）

　　IV. Report on Postponing⁶ the Submission⁷ of Formal Written Application for Negotiated Pricing Arrangement （omitted）

　　V. Official Reply to the Formal Written Application for Postponing the Submission of Application for Negotiated Pricing Arrangement （omitted）

　　VI. Preliminary Conclusion of Examination and Appraisal⁸ （omitted）

　　VII. Notice on Postponing Examination and Appraisal （omitted）

　　VIII. Form for Examination of the Preliminary Conclusion of Examination and Appraisal （omitted）

　　IX. Negotiated Pricing Arrangement （Text for Reference） （omitted）

　　X. Form for Approval of Negotiated Pricing Arrangement （Draft） （omitted）

　　XI. Application for Renewing Negotiated Pricing Arrangement （omitted）

　　XII. Official Reply to Application for Renewing Negotiated Pricing Arrangement （omitted）

　　XIII. Form for Examination and Approval of Negotiated Pricing Arrangement （omitted）

　　XIV. Report on Altering the Enforcement Term of Negotiated Pricing Arrangement （omitted）

　　XV. Contacting Note for the Work of Negotiated Pricing Arrangement （omitted）

　　The State Administration of Taxation

　　September 3rd， 2004

　　The Implementing Rules for Negotiated Pricing for the Transactions Among Associated Enterprises （for Trial Implementation）

　　Chapter I General Provisions

　　Article 1 With a view to regulating the procedures for administering tax collection related to the negotiated pricing arrangement among the associated enterprises， the present Implementing Rules are formulated¹⁰ in accordance with Article 36 of the Law of the People's Republic of China on the Administration of Tax Collection （hereafter referred to as “the Law on the Administration of Tax Collection”） and Articles 51 to 56 of the Detailed¹¹ Rules for its Implementation thereof （hereafter “the Detailed Rules”） as well as the relevant provisions of the tax treaties entered into between the Chinese Government and the governments of other countries （hereafter referred to as “tax treaties”） arrangement.

　　Article 2 The present Rules shall apply to the administration of tax collection related to the negotiated pricing arrangement among associated enterprises. The term “administration of tax collection related to the negotiated pricing arrangement among associated enterprises” refers to the specific administrative¹² work such as talks， examination and appraisal， discussions， formulating¹³ and approval of negotiated pricing arrangement as well as monitoring enforcement that are conducted by the competent tax authorities and the taxpayers¹⁵ on the basis of free will， equality， and good faith and according to the present Rules in the dealings between the taxpayers and their associated enterprises regarding the purchase and use of tangible¹⁷ assets， the transfer and use of intangible assets， the provision of labor¹⁸ services and the financing of working capital， for which the taxpayers apply for determining in advance the principles of negotiated pricing and ways of computation to be applied¹⁹ to the associated dealings so as to solve and determine the tax issues involved in the associated dealings in future years.

　　Article 3 The term “the competent tax authorities at various levels” as mentioned in the present Rules refers to the tax administrations at the level of districted cities and prefectures or above. The specific implementation shall be conducted by the international （foreign-related） tax administrative organs set up within the tax administrations of the districted cities and prefectures or other tax administrative departments.

　　Chapter II Preparatory Talks

　　Article 4 The competent tax authorities shall， before agreeing to the application for negotiated pricing arrangement officially submitted by a taxpayer¹⁴， hold preparatory talks in light of the request of the taxpayer on such issues as the arrangement of negotiated pricing， the scope of negotiated pricing arrangement that require study and analysis. Such issues as the time， place and concrete content of the preparatory talks shall be subject to the determination by both parties.

　　Article 5 Where a preparatory talk concerning any negotiated pricing arrangement is likely to be undertaken， the taxpayer shall， at the same time of filing a written request to the competent tax authority， put forward a written suggestion or opinions regarding the following aspects：

　　1. the procedures for implementation：

　　（1） suggestion for negotiated pricing arrangement；

　　（2） time period for negotiated pricing arrangement；

　　（3） the documents and materials to be submitted；

　　（4） the reporting and monitoring after the negotiated pricing arrangement are approved；

　　（5） whether the tax issues of previous years shall be solved through the negotiated pricing arrangement.

　　2. concrete contents including：

　　（1） information about the relevant associated enterprises；

　　（2） information about the tax auditing²⁰ of previous years；

　　（3） the statement of the relevant business operations involved in the negotiated pricing arrangement；

　　（4） information about relevant associated dealings both at home and abroad；

　　（5） functional²¹ and comparability analysis （including the analysis of the market situation and the comparable prices available）；

　　（6） consideration of adjusting factors of the comparable information；

　　（7） the principles of transfer pricing and the ways of calculation to be adopted， and the explanation of why they accord with the principle of fair dealings；

　　（8） the hypothetical conditions on which the transfer pricing principles and way of computation to be adopted are based；

　　（9） the double taxation problems that may occur， including the procedures for mutual²² negotiation²³ of tax treaties；

　　（10） other things that need to be accounted for.

　　Article 6 When a preparatory talk concerned negotiated pricing arrangement is likely to be conducted， the competent tax authority shall， within 20 days as of receiving the written request as well as the preliminary suggestion and opinions of the taxpayer， give a written reply to the taxpayer. If it does agree to the written requests of the taxpayer， it shall give its reasons in its reply. If it agrees to the written requests of the taxpayer， it shall make a statement of the following aspects：

　　1. for the procedures for implementation：

　　（1） the feasibility of the relevant negotiated pricing arrangement；

　　（2） the time schedule for the different stages of the discussion about the negotiated pricing arrangement， including the basic requirements and the general provisions and principles of examination and appraisal and time periods；

　　（3） other procedural issues that need to be accounted for.

　　2. for the concrete contents， mainly stating：

　　（1） the scope of application of the negotiated pricing arrangement；

　　（2） the provisions on relevant tax treaties， and the possibility of coming into a consensus²⁴ of negotiated pricing arrangement；

　　（3） analysis and appraisal materials that should be supplied according to different types of associated dealings；

　　（4） time for examination and approval；

　　（5） the obligations and duties， etc. of both parties after the negotiated pricing arrangement are approved.

　　Article 7 Where the negotiated pricing arrangement of two or more parties to a tax treaty are concerned at the stage of preparatory talk， a written report should be made in time to the State Administration of Taxation about the entirety of the preparatory talk. Where， after the preparatory talks， both parties come in to a consensus， the competent tax authority should inform the taxpayer in written form within 15 days after the consensus is reached， and it may hold formal negotiations²⁵ about the negotiated pricing arrangement matters. After the formal negotiations about the negotiated pricing arrangement and before the conclusion of negotiated pricing arrangement， both the competent tax authority and the taxpayer may discontinue the negotiations.

　　Chapter III Formal Application

　　Article 8 The taxpayer shall， within 3 months after receiving a notice of the competent tax authority stating that formal negotiation about negotiated pricing arrangement can be carried through， file a formal written application to the competent tax authority for carrying out the negotiated prices into effect. If the formal written application for negotiated pricing arrangement involving two or more parties， the taxpayer shall report it to the State Administration of Taxation concurrently²⁶. If， due to any of the special reasons as described below， the taxpayer finds it necessary to delay the submission of a formal written application， it may make a extension report to the competent tax authority：

　　1. where it is really necessary to prepare some materials；

　　2. where it is necessary to make technical treatment to the materials， e.g.， text translation， etc.；

　　3. other non-subjective reasons.

　　The competent tax authority shall， within 15 days after receiving the report for postponing the submission of a formal written application for the negotiated pricing arrangement， make a written reply concerning the application. If no reply is made after the time limit expires， it shall be deemed that the competent tax authority has agreed to the application of the taxpayer for postponing the submission.

　　Article 9 The formal written application as submitted by the taxpayer to the competent tax authority concerning the negotiated pricing arrangement should include at least：

　　1. the relevant group organization， corporate²⁷ structure， associated relations， associated dealings， etc.；

　　2. the financial and accounting²⁸ statements of the taxpayer of the recent three years， the materials about the functions of products and the assets （including intangible assets and tangible assets）；

　　3. the types of associated dealings and the tax years involved in the negotiated pricing arrangement；

　　4. the division of duties， functions， and risks among the associated enterprises；

　　5. whether the negotiated pricing arrangement involve two or more parties to a tax treaty；

　　6. consideration of the principles for transfer pricing applicable to negotiated pricing arrangement and the methods of computation as well as the functional analysis and comparability analysis that support the said principles and methods， and the hypothetical conditions for the transfer pricing principles and computation methods to be adopted；

　　7. the statement for the market situation， including the trend of development of the industry concerned and the competition environments；

　　8. a prediction of the business operation yields of the negotiated term， and a plan， etc.；

　　9. the attitude of relevant associated enterprises towards cooperation， whether they could provide the information about their dealings， operation arrangement， financial achievements and etc.；

　　10. whether double taxation is involved in；

　　11. issues related to the laws and tax treaties both at home and abroad， etc.

　　The aforesaid materials that shall be provided exclude those that have been reported by the taxpayer according to laws and regulations related to tax collection.

　　The documents and materials and explanations as mentioned above， including all the documents and materials that can support the pricing principles and computation methods to be adopted and all the documents and materials that can prove that the conditions for the negotiated pricing arrangement are met， shall be properly kept by the taxpayer and the competent tax authority.

　　Chapter IV Examination and Appraisal

　　Article 10 The competent tax authority shall， within five months as of the day when it receives the formal written application for negotiated pricing arrangement and the necessary documents and materials submitted by the taxpayer， conduct examination and appraisal and may， pursuant to the specific situation of examination and appraisal， put forward consultations²⁹ to the taxpayer or the tax agent thereof and demand them to supplement relevant materials so as to form a conclusion of examination and appraisal. If it is necessary to prolong the time for examination and appraisal due to special circumstances， it shall notify the taxpayer in writing timely， and the extension may not be any longer than 3 months. If the negotiated pricing arrangement involves two or more parties to a tax treaty and it is necessary to prolong the time period longer than that as prescribed above， it shall be subject to the discussion by both parties.

　　Article 11 The examination and appraisal conducted by the competent tax authority to the formal written application for negotiated pricing arrangement shall include at least：

　　1. the historical situation of business operations. In the analysis and appraisal of such documents as the operational plans， trend of development， scope of business， etc. of the taxpayer， the emphasis should be placed on examining the feasibility study report， the resolution on investment budget （final settlement）， the resolutions of the board of directors， etc.， and a comprehensive analysis should be made to reflect relevant information and materials such as finance and accounting statements， auditing reports， etc. The focus should be laid on the historical and present situations so as to find out the key factors that influence the operation of enterprises concerned.

　　2. the functions and risks. When transactions between the taxpayer and its associated enterprises are analyzed³¹ and appraised³³， attention should be paid to the respective shares held by the parties concerned at the different stages of goods supply， production， transport， and sale， etc. and in such aspects as research and development of intangible assets， the functions to be performed， and the risks to be undertaken at the different stages such as inventory³⁴， credit and financing， foreign exchange， market， etc.

　　3. information about comparable prices. Analyzing³⁵ and appraising³⁶ the information about comparable prices both at home and abroad as provided by the taxpayer can show the great differences in pricing between independent enterprises and between associated enterprises， and can help adjust the material differences that affect the dealings. If it is impossible to affirm the rationality of the comparable dealings or the operation activities， it shall clarify the other documents and materials that the taxpayer has to supplement so as to prove that the transfer pricing principles and methods of computation that it has adopted have fairly reflected the dealings between the associated enterprises under examination and the status quo of the business operations as well as that they have been proved by relevant finance and operation materials.

　　The competent tax authorities should gather the comparable prices from various sources， including analyzing the data in the export goods statements that exist in the sub-system of tax refund³⁷ for the export of goods under the system of “Port Electronic Enforcement System” of tax refund for the export of goods which is already under its control， and evaluating the rationality of the comparable dealings or operation activities.

　　4. hypothetical conditions. To analyze³⁰ and appraise³² all the information and materials as well as the statements as provided by the taxpayer that can support or prove the negotiated transfer pricing principles and the methods of calculation， one shall analyze their influences on the profitability of the industry concerned in the macro and micro aspects （e.g.， politics， economy， law， technology， etc.）， and analyze their impacts on the taxpayer in such aspects as business strategy， production scale， and the hypothesis of life circle， etc. so as to determine whether or not they are reasonable.

　　5. the principles of transfer pricing and the methods of calculation. One should analyze and appraise whether the transfer pricing principles and the calculation methods as adopted by the taxpayer in negotiated pricing arrangement are applied to the past， present， and future dealings between the associated enterprises as well as in the relevant finance and operationmaterials， how they are authentically³⁸ applied and whether they accord with the provisions of relevant laws and regulations.

　　6. the expected fair dealings prices or profit values. By making further examination and appraisal of the decided³⁹ comparable prices， profit plus percentage， the dealings between the comparable enterprises， etc.， one could obtain the price or profit value acceptable to both the tax authority and the taxpayer by means of the suggested transfer pricing principles and methods of calculation so as to lay the foundation for determining the negotiated pricing arrangement.

　　Article 12 The competent tax authority shall report the conclusion of examination and appraisal of the negotiated pricing arrangement involving two or more parties to a tax treaty， level by level， to the State Administration of Taxation for examination and approval.

　　Chapter V Negotiations

　　Article 13 The competent tax authority shall， within 30 days as of the day when the examination and appraisal conclusion is formed， conduct further negotiations with the taxpayer in terms of major issues such as the functions， risks， information about comparable prices， hypothetical conditions， pricing principles， methods of calculation， the fair dealings value and etc. so as to exchange opinions， come into a consensus and form a draft of the negotiated pricing arrangement. If the draft involves two or more parties to the negotiated pricing arrangement， it shall be reported level by level to the State Administration of Taxation for examination and approval.

　　Article 14 The contents of the draft of negotiated pricing arrangement shall mainly include：

　　1. the relevant associated enterprises （basic information of all the enterprises involved in the negotiated pricing arrangement， such as name and address， etc.）；

　　2. the associated dealings involved and the time period thereof；

　　3. the setup of the relevant articles and the valid⁴⁰ term thereof；

　　4. the methods of transfer pricing （including the decided comparable prices or dealings， the pricing principles and methods of calculation， the anticipated scope of outcome of business operation， etc.）；

　　5. definition of the terms related to the application of the transfer pricing methods and the basis of calculation （e.g.， sales volume， sales costs， gross profits， net profits， etc.）；

　　6. hypothetical conditions；

　　7. the obligations of the taxpayer， including the annual reports， record keeping， the notices of variation of hypothetical conditions， etc.；

　　8. the force adeffect of the arrangement， the confidentiality⁴² of the documents and materials， etc.；

　　9. clauses about mutual responsibilities；

　　10. revision of the arrangement；

　　11. the ways and means of dispute resolution；

　　12. elimination⁴³ of double taxation；

　　13. points for attention；

　　14. date on which the arrangement become effective；

　　15. other relevant attachments⁴⁴.

　　Chapter VI Signing of Arrangement

　　Article 15 Within 30 days after the competent tax authority and the taxpayer enter into an agreement regarding the content of the draft of the negotiated pricing arrangement， the legal representatives of both parties or the representatives empowered by the legal representatives of both parties shall sign the formal negotiated pricing arrangement.

　　Article 16 The negotiated pricing arrangement shall apply generally only to the business dealings between the associated enterprises during the 2 to 4 years as of the second year when the taxpayer submits a formal application. However， if the year when the taxpayer files a formal application for negotiated pricing arrangement， the situation of business operation， the types of associated dealings and the various conditions concerned are coincident with or similar to those as stipulated⁴⁵ in the negotiated pricing arrangement to be signed， they， after the examination and approval of the tax authority in charge， may be retroactively applicable to the year when the formal application is submitted.

　　Article 17 The negotiated pricing arrangement may be renewed consecutively⁴⁶， but may not be automatically renewed. The taxpayer should file an application to the competent tax authority 90 days prior to the expiry of the term of execution of the originally signed negotiated pricing arrangement， and shall concurrently provide reliable certification materials so as to show that the facts and other environments as described in the negotiated pricing arrangement that are due have not undergone any substantial change， and that it has been according with the various clauses and stipulations of the negotiated pricing arrangement. The competent tax authority should， within 60 days as of the day when it receives the application of the taxpayer for renewing the arrangement， complete the examination， appraisal and formulation of the draft of negotiated pricing arrangement， and shall complete the renewal⁴⁷ with the taxpayer in light of the time， place and other matters as agreed to by both parties.

　　Chapter VII Monitoring the Execution

　　Article 18 The competent tax authority shall monitor the execution of the negotiated pricing arrangement as concluded by it and the taxpayer， and shall establish relevant system for the monitoring.

　　Article 19 Within the term of execution of the negotiated pricing arrangement， the taxpayer must well keep the complete set of the documents and materials relating to the negotiated pricing arrangement （including the account books and other relevant records， etc.）， and may not lose， destroy or transfer any of them. It must， within 4 months after a tax year ends， submit an annual report to the competent tax authority about the execution of the negotiated pricing arrangement. The annual report shall account for the situation of business operation during the term of report， and prove that it has observed the clauses of the negotiated pricing arrangement， including all the matters as required by the negotiated pricing arrangement and whether it is required to revise or substantially cancel the negotiated pricing arrangement. If there is anything remaining unsolved or to occur， the taxpayer must also make an explanation in the annual report so as to discuss with the competent tax authority on whether or not to change， alter or terminate the arrangement.

　　Article 20 During the term of the negotiated pricing arrangement， the competent tax authority shall regularly inspect the execution of the arrangement by the taxpayer. The inspection⁴⁸ should mainly involve： whether the taxpayer has complied with the arrangement and the requirements therein； whether the materials provided for negotiating and signing the arrangement and the annual report have reflected the actual operation situation of the taxpayer； whether the materials and methods of calculation on which the transfer pricing methods are based are correct； whether the hypothetical conditions as described in the arrangement still remain effective； whether the application of the transfer pricing methods by the taxpayer is in conformity⁴⁹ with the hypothetical conditions， etc.

　　If the taxpayer observes the clauses of the negotiated pricing arrangement and is in conformity with the conditions of the arrangement， the competent tax authority shall accept the transfer pricing principles and methods of calculation for the associated dealings as described in the negotiated pricing arrangement. If the taxpayer has been found any ordinary violation⁵⁰ of the arrangement， it shall be punished according to the specific circumstances， even up to canceling the arrangement. If it is found that the taxpayer has disguised anything or refused to execute the arrangement， the competent tax authority shall terminate the execution of the arrangement retroactively to the first day of the first year when the negotiated pricing arrangement are carried into effect.

　　Article 21 During the term of the negotiated pricing arrangement that have been signed and executed， if any of the actual operation outcomes does not fall within the range of expected prices or profit values of the arrangement， and such violation does not constitute a violation of the whole clauses of the arrangement and the requirements therein， the competent tax authority shall， after reporting to the superior competent tax authority for verification， adjust the actual operation outcomes so that they fall within the range of prices or profit values as determined⁵¹ by the arrangement， and shall make corresponding adjustment to all the parties involved in the relevant associated dealings with the taxpayer. If the negotiated pricing arrangement involves two or more parties to a tax treaty， it should be reported， level by level， to the State Administration of Taxation for verification.

　　Article 22 If， during the term of executing the negotiated pricing arrangement， there occurs any substantial change that may affect the negotiated prices （e.g.， the hypothetical conditions change.）， the taxpayer shall， within 15 days after the change takes place， file a written report to the competent tax authority， making a detailed explanation of the impact of the change to the negotiated pricing arrangement and attaching relevant materials. The report may be delayed due to non-subjective reasons for not more than 15 days. The competent tax authority shall， within 30 days as of receiving the written report of the taxpayer， make an examination and appraisal， and deal with it such as examining the change involved， discussing with the taxpayer about revising the relevant clauses or relevant conditions of the negotiated pricing arrangement， or taking reasonable remedial measures or suspending the negotiated pricing arrangement according to the influence of the substantial change on the execution of the negotiated pricing arrangement， and etc. When the execution of the original negotiated pricing arrangement is suspended， the competent tax authority may， in light of the procedures and requirements stipulated in the present Rules， renegotiate with the taxpayer about the negotiated pricing arrangement.

　　Chapter VIII Supplementary⁵² Provisions

　　Article 23 If， during the process of discussion on signing or executing the negotiated pricing arrangement with a taxpayer， the competent tax authority find it necessary to assort with or jointly⁵⁴ discuss about the signing of arrangement with the tax authorities of other places within the same province or with the tax authorities of other provinces， autonomous regions or municipalities directly under the Central Government （including the administrations of state taxes and those of local taxes）， they shall exchange information and discuss about assistance pursuant to the following procedures， or jointly cope with the matters according to certain sequences：

　　1. If the associated dealing¹⁶ is within a same province， autonomous region， municipality directly under the Central Government， or a city under separate state planning， the tax authority that has accepted the application of the taxpayer （including the application for preparatory talks and the formal application） shall directly ask the competent tax authorities of relevant places （including the administrations of state taxes and those of local taxes） to handle or jointly handle it pursuant to certain sequences upon the approval of the administration of state taxes or that of local taxes of the province， autonomous region， municipality directly under the Central Government or city under separate state planning.

　　2. If the associated dealing involves two provinces， autonomous regions， municipalities directly under the Central Government， or cities under separate state planning， the competent tax authority that has accepted the application of the taxpayer （including the application for preparatory talks and the formal application） shall fill in a Liaison⁵⁵ Note for Negotiated Pricing Arrangement， and report it to the administration of state taxes at the provincial⁵⁶ level or that of local taxes of the same province， autonomous region， municipality directly under the Central Government， or city under separate state planning so that the latter could contact the administration of state taxes or that of local taxes of the other relevant province， autonomous region， municipality directly under the Central Government， or city under separate state planning for handling. The administration of state taxes and that of local taxes of the other province， autonomous region， municipality directly under the Central Government， or city under separate state planning shall， within 15 days as of receiving the Liaison Note， study relevant information， materials， ways of assistance and the possibility of joint⁵³ handling， and shall give an written reply.

　　3. If any of the following circumstances occurs to the discussion on signing or executing the negotiated pricing arrangement， it shall be reported in writing， level by level， to the State Administration of Taxation which is responsible for coordinating⁵⁷， supervising or directly handling the matter. The State Administration of Taxation shall handle it and give a letter reply in time according to provisions of the present Article：

　　（1） Where the associated dealing involves 3 or more provinces， autonomous regions， municipalities directly under the Central Government， or cities under separate state planning；

　　（2） Where the amount of associated dealings that are conducted within and out of the territory are considerably⁵⁸ large， which means that the prices or expenses collected or paid for yearly business transactions among the associated enterprises reaches 10 million yuan or more， or the types of associated dealings are relatively⁵⁹ more；

　　（3） Where the negotiated pricing arrangement involving two or more parties are to be discussed for signing， to be executed， renewed， altered， revised， or suspended.

　　Article 24 All the administrations of state taxes and those of local taxes shall accept the negotiated pricing arrangement which are agreed upon or jointly concluded by them together with the taxpayers， so long as the taxpayers have complied with all the articles of the arrangement and the requirements thereof. If the arrangement are jointly concluded between a taxpayer and the competent administration of state taxes and administration of local taxes of a relevant place， the taxpayer shall， during the process of execution of the negotiated pricing arrangement， submit to the competent administration of state taxes and administration of local taxes of the relevant place respectively an annual report on the execution of the negotiated pricing arrangement as well as a report of the changes in accordance with the provisions of Articles 20 and 23 of the present Provisions. The competent administration of state taxes and those of local taxes of the relevant place shall， according to Article 85 of the Detailed Rules for the Implementation of the Law on the Administration of Tax Collection and the provisions of Articles 21 and 23 of the present Provisions， conduct joint inspection and examination on the taxpayers' execution of the arrangement. With regard to the specific liaison information and procedures for handling， Article 24 of the present Provisions shall apply.

　　Article 25 All the information and materials that have been obtained and gained during the whole process of preparatory talk， formal talk， examination and appraisal， analysis and etc. of the negotiated pricing arrangement， shall be kept confidential⁴¹ by both the competent tax authority and the taxpayer， and shall be subject to the protection and restriction⁶⁰ of the relevant provisions of the tax law and the state security law. For each talk （including preparatory talks and formal talks） between the competent tax authority and the taxpayer， a written transcript⁶¹ of the content of the talk shall be kept， which shall， at the same time， give an indication of the number of copies of the materials mutually provided during the talk and the content thereof and bear the signature of both parties. If， after preparatory talks or formal talks， the competent tax authority and the taxpayer fail to reach an agreement on the negotiated pricing arrangement and have to terminate the talk， both parties shall return all the materials provided by the other party during the talk to the other party.

　　Article 26 Where the competent tax authority and the taxpayer cannot reach a negotiated pricing arrangement after having talks or negotiations， any of the non-factual information （such as the various kinds of proposals， inferences， ideas and judgments⁶²） that has been obtained or gained by either party in the process of talks and negotiations may not be used in the auditing of the dealings related to the said negotiated pricing arrangement.

　　Article 27 Where the competent tax authority has any dispute with the taxpayer in the execution and interpretation⁶³ of the negotiated pricing arrangement， both parties shall negotiate with each other fully⁶⁴. And if such negotiations fail， it shall be reported to the superior competent tax authority or reported， level by level， to the State Administration of Taxation for reconciliation⁶⁵. The result of reconciliation or decision of the superior tax authority or the State Administration of Taxation shall be executed by the lower-level tax authority. If the taxpayer still refuses to accept it， the competent tax authority should consider to suspend the execution of the arrangement.

　　Article 28 If any negotiated pricing arrangement involves two or more parties to a tax treaty， and it is necessary to initiate⁶⁶ the mutual negotiation procedures between the competent tax authorities of both parties to the treaty according to the relevant provisions of the tax treaty， the State Administration of Taxation shall take charge and formulate⁹ corresponding procedures.

　　Article 29 The competent tax authority shall， within 5 days as of the formal signing of Negotiated Pricing Arrangement with a taxpayer， or within 10 days as of altering， suspending， or canceling any clause in the process of executing the Negotiated Pricing Arrangement， submit the formal text of the Negotiated Pricing Arrangement and an explanation of the relevant changes level by level to the State Administration of Taxation for archival purpose.

　　Article 30 The procedures as described in the present Provisions shall be also applicable to the revision of any single clause of the negotiated pricing arrangement that is already in effect.

　　Article 31 The various documents as required for during the execution of the present Provisions as well as the reference texts of negotiated pricing arrangement shall be implemented⁶⁷ concurrently with the present Provisions.

　　Article 32 The power to interpret and revise the present Provisions shall remain with the State Administration of Taxation.

　　Article 33 The present Provisions shall come into force as of the day of promulgation⁶⁸. In case Article 48 of the Rules for the Tax Management of the Dealings between Associated Enterprises （No. 59[1998] Guo Shui Fa） as issued by the State Administration of Taxation on April 23， 1998 conflicts with the present Provisions， the latter shall prevail. The negotiated pricing arrangement concluded between the competent tax authority and any taxpayer prior to the promulgation of the present Provisions may be executed until the expiry of the said arrangement， while for the negotiated pricing arrangement concluded subsequent to the promulgation of the present Provisions of renewed due to expiry of the term of execution prior to the promulgation of the present Provisions， the present Provisions shall be observed.

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