On October 5, 2015, the Organization for Economic Co operation and Development (“OECD”) released its final report on the 15 key elements of international tax rules set out in its Base Erosion and Profit Shifting (“BEPS”) Action Plan.

The OECD launched the BEPS Action Plan in 2013 at the request of the G20 to address the growing problem of multinational companies (“MNCs”) moving profits to low- or no-tax jurisdictions to avoid taxation. Over the past 12 months tax authorities around the world, including China, have been focusing their attention on the implementation of BEPS-related measures. One major challenge faced by China is the current direct and indirect tax planning practices of MNCs, which involve the use of various types of fee structures, including royalties and franchise fees, to transfer profits out of China.

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