Simplified process for UAPAs


The State Taxation Administration (STA) recently released Bulletin [2021] No. 24, introducing a new simplified process for the administration of unilateral advance pricing arrangements (UAPAs).

Key takeaways

    • The Chinese tax authorities are increasingly willing to accelerate the APA process to confirm compliance with the arms’ length principle of related party transactions.

    • Bulletin No. 24 introduces a new simplified process for the UAPA with fewer steps, specified timeline and one-off submission of application documents to achieve efficiency and tax certainty for multinational companies (MNCs).

    • The simplified UAPA process could serve as a useful and practical tool for MNCs to manage their transfer pricing (TP) risks.

    • The simplified process is not one size fits all. MNCs are encouraged to engage professional tax advisers to assess if they will be able to take advantage of the simplified UAPA process.

Our observations

In recent years, the central government has been working hard to develop a more transparent, predictable and accessible business environment for MNCs. Against this backdrop, the Chinese tax authorities are increasingly open to accelerating the APA process to confirm compliance with the arm’s length principle.

The introduction of a simplified process for UAPAs signals tax authorities’ willingness to engage in a mutual negotiation process with MNCs over their transfer pricing matters, instead of relying heavily on confrontational TP audits.

The simplified process, if it works as planned, would enable taxpayers to obtain a UAPA within a year. This would increase the overall value of the UAPA and its usefulness to MNCs. In addition, coupled with the recent relaxation of the foreign exchange control on cross-border transfer pricing adjustment, the simplified UAPA would make it possible for MNCs to make the transfer pricing adjustments (true-up or true-down) at the year-end, without other complications.

Who will benefit from a simplified UAPA? Besides the considerations for APAs in general, a UAPA can only obtain tax certainty in one jurisdiction, and therefore would not be able to relieve MNCs from potential double taxation. The UAPA, including the UAPA under the simplified process, is only suitable to the taxpayers for transactions for which double taxation is not a concern.

For example, assuming that the double taxation risk is not a concern, MNCs that were subject to TP audit that had been concluded for previous tax periods may be incentivised to apply for a UAPA under the simplified process. In such a case, MNCs may agree to continue to adopt the agreed existing TP methodologies and comparables as set out in the previous tax audit, while using the UAPA to agree on a reduced target operating margin, reflecting the latest operating data for recent years.

Since the simplified process is not one size fits all, MNCs are encouraged to engage professional tax advisers to assess if they would be able to take advantage


Bulletin No. 24 is an improvement to the existing rules relating to UAPAs. The simplified UAPA process, coupled with the relaxation of foreign exchange controls in cross-border transfer pricing adjustment, will allow certain MNCs more flexibility and agility in managing their TP risks.

Business Law Digest is compiled with the assistance of Baker McKenzie. Readers should not act on this information without seeking professional legal advice. You can contact Baker McKenzie by e-mailing Howard Wu (Shanghai) at