An empirical study of tax audits in China on international transfer pricing

Koon Hung CHAN, Lynne CHOW

Research output: Journal PublicationsJournal Article (refereed)peer-review

35 Citations (Scopus)


This research studies how Chinese tax authorities implement international transfer pricing legislation. The analysis indicates that tax audits on transfer pricing are confined mainly to medium- and small-sized foreign investments, lower-technology companies and transfer of tangible goods, and tend to focus on certain nationality and forms of foreign investment. Persistent losses, low profitability and lack of local partners in joint venture management most often trigger tax audits. The authorities focus on profit results rather than prices, and often use comparable profit method to adjust income. Tax differentials do not appear to be the most important inducement to transfer pricing manipulations.
Original languageEnglish
Pages (from-to)83-112
Number of pages30
JournalJournal of Accounting and Economics
Issue number1
Publication statusPublished - 1 May 1997
Externally publishedYes


  • Tax audits; International transfer pricing; China


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