A tax self-examination makes a listed company shell out nearly 200 million dollars in real money, which is not only an announcement, but also a stern warning to all cross-border enterprises.

On January 31, 2026, Lanshan Medical released a back tax announcement that caused quite a shock in the financial and tax circles. The listed medical outbound company was required to pay a total of 195.86 million yuan in back taxes and interest due to transfer pricing issues.

Although the announcement said that "no tax administrative penalty is involved for the time being", the expenditure of nearly 200 million yuan will undoubtedly have a significant impact on the profits of the enterprise. This case reminds all cross-border enterprises that transfer pricing compliance is not a trivial matter.

Be sure to see the end, which has an exclusive compliance counseling benefit to help you do less. You can also add our online customer service(WeChat: jxhAna888)Arrange professional consultants to answer questions, provide professional advice and one-on-one service throughout the process.

01.The beginning and end of the story: a "tax bill" of nearly 200 million dollars

The announcement of Lanshan Medical shows that the Company and its subsidiaries have carried out a special tax adjustment self-inspection on tax-related matters relating to transfer pricing of cross-border connected transactions of the Health Protection Division for the years 2020 to 2022 in accordance with the requirements of the tax authorities.

The result of the self-examination is shocking: the company needs to pay back taxes of 16,956.09 million yuan, plus the corresponding interest, totaling up to 19,586.00 million yuan. This huge amount of expenditure will be included in the current profit and loss in 2025, which will correspondingly reduce the company's net profit in that year.

It is worth noting that the back tax payment involves cross-border related transactions of the company's health protection business unit from 2020 to 2022, which is the period when the demand for medical protection supplies surged during the global public health events. Despite the huge amount of back tax, the announcement clearly states that the matter does not involve tax administrative penalties, implying that the company's proactive attitude of self-examination and back tax payment has been recognized to some extent.

If you haveHong Kong Company Registration, Bank Account Opening, Annual Audit, Tax Audit, ODI Filing and Tax Complianceetc. needs, 👉 Welcome to sweep the code to add our online customer service (WeChat: jxhqcy890 / cell phone: 16625410105), to arrange for the manager to answer questions, to provide professional advice and full one-on-one service!

02.Transfer Pricing: A Double-Edged Sword in Taxation for Multinationals

Transfer pricing, in simple terms, is the price-setting mechanism used in transactions between affiliates within multinational corporations. How such prices are set is directly related to the distribution of profits across countries and regions, which in turn affects the tax burden.

The principle of independent transactions is the "golden rule" of transfer pricing. According to this principle, the pricing of transactions between related enterprises should be comparable to that of transactions between unrelated enterprises. If an enterprise shifts profits to a low-tax region by artificially raising or lowering the transfer price, it will face investigation and adjustment by the tax authorities.

In the case of Lanfan Medical, the tax authorities required the enterprise to conduct a "special tax adjustment self-inspection" on the transfer pricing of cross-border related transactions. This indicates that the tax authorities may believe that the pricing of the related transactions does not comply with the principle of independent transactions, and there is a suspicion of transferring profits overseas through transfer pricing.

Why is 2020-2022 a tax focus?

During this period, the global demand for medical protection products surged and prices soared. As a manufacturer of health protection products, Lanshan Medical's business during this period should have been lucrative. The core logic of the tax authorities' investigation is: during the period of abundant profits, did the enterprise transfer the profits that should have been realized in China outside the country through transfer pricing arrangements?

If you haveHong Kong Company Registration, Bank Account Opening, Annual Audit, Tax Audit, ODI Filing and Tax Complianceetc. needs, 👉 Welcome to sweep the code to add our online customer service (WeChat: jxhqcy890 / cell phone: 16625410105), to arrange for the manager to answer questions, to provide professional advice and full one-on-one service!

03.Transfer pricing methodology: matching functional risk is key

Transfer pricing is not simply a "pricing" exercise, but a rigorous compliance system. Whether or not an enterprise's connected transactions comply with the principle of independent transactions depends to a large extent on whether or not the choice of transfer pricing method matches the functions and risks actually borne by the enterprise.

According to the international tax rules and the PRC tax law, different transfer pricing methods have their own prerequisites for application:

1. Remarketing price method: Applies to simple processing or distribution activities in which the re-seller does not perform substantial value-added processing of the goods, such as altering their form, performance, structure, or replacing trademarks. This method is more appropriate if the enterprise is merely a channelizer and does not create significant value added.
2. Cost-plus method: Applicable to scenarios such as transfer of tangible assets, capital financing, labor transactions, etc., especially when the counterparty bears a limited amount of R&D or market risk and obtains a reasonable return mainly through cost inputs.
3. Net Profit on Transaction Method: This method has a broader scope of application and is particularly suitable for asset transfers, intangible asset transfers and labor transactions conducted by enterprises that do not own significant intangible assets. This method determines whether pricing is fair by examining the level of net profit, and is currently one of the most commonly used methods by multinational enterprises.

Choosing the wrong method may lead to inaccurate attribution of profits and give rise to tax risks. For example, an enterprise with an R&D function that incorrectly uses the re-sale price method may underestimate its value contribution, resulting in an unreasonable shift in profits.

If you haveHong Kong Company Registration, Bank Account Opening, Annual Audit, Tax Audit, ODI Filing and Tax Complianceetc. needs, 👉 Welcome to sweep the code to add our online customer service (WeChat: jxhqcy890 / cell phone: 16625410105), to arrange for the manager to answer questions, to provide professional advice and full one-on-one service!

04.Contemporaneous information: "Talisman" for business self-certification

Contemporaneous information plays a critical role in transfer pricing management. Contemporaneous information, including subject files, local files and special matter files, is the key evidence for companies to prove that their connected transaction pricing complies with the principle of stand-alone transactions.

According to the regulations, eligible enterprises must prepare the same period of information: enterprises with the amount of transfer of ownership of tangible assets exceeding 200 million yuan, the amount of transfer of financial assets exceeding 100 million yuan, the amount of transfer of ownership of intangible assets exceeding 100 million yuan, or the amount of other related transactions totaling more than 40 million yuan, should prepare local documents. And enterprises whose total amount of annual connected transactions exceeds 1 billion yuan should prepare the main document.

Contemporaneous information is not only a compliance requirement, but also a "talisman" for enterprises to prove their innocence. When the tax authorities carry out investigations, enterprises that can provide timely and complete contemporaneous information can, to a large extent, prove their compliance and avoid more serious penalties.

The fact that Lanshan Medical has not been imposed administrative penalties despite the need to pay huge amounts of back taxes is not unrelated to its active cooperation with self-inspection and initiative in providing relevant information. The same period of information should be prepared before June 30 of the year following the year in which the related transactions occur, and provided within 30 days from the date of request by the tax authorities, and need to be kept for 10 years. These time points and preservation requirements must be strictly observed by enterprises.

If you haveHong Kong Company Registration, Bank Account Opening, Annual Audit, Tax Audit, ODI Filing and Tax Complianceetc. needs, 👉 Welcome to sweep the code to add our online customer service (WeChat: jxhqcy890 / cell phone: 16625410105), to arrange for the manager to answer questions, to provide professional advice and full one-on-one service!

05.Four common risks to cross-border fiscal compliance

The case of Lanshan Medical is just the tip of the iceberg. In actual operations, the financial and tax compliance risks faced by cross-border enterprises are far more complex than imagined:

Risk 1: Lack of reasonable commercial substance in the pricing of connected transactions

When setting the price of a connected transaction, many enterprises tend to consider only the optimization of the overall tax burden of the group, while ignoring the business substance requirements behind the "independent transaction principle". For example, if a related company located in a low-tax region does not actually undertake R&D, sales or management functions, but only receives profits as a "paper company", it is very easy for the tax authorities to deny the value of its existence, thus triggering special tax adjustments.

Risk 2: Inadequately prepared or logically contradictory contemporaneous information

Although many enterprises have prepared contemporaneous information, it is often a mere formality and fails to truly reflect the full picture of their operations. Common problems include: functional risk analysis is not in line with the actual situation of the enterprise, the selected transfer pricing method lacks data support, and the content of the document is inconsistent. Once the tax authorities initiate an investigation, such "sick" contemporaneous information will not only fail to become a "talisman", but may instead become a "self-incriminating statement" proving that the enterprise is non-compliant.

Risk 3: Cross-border lending and capital weaknesses

Capital financing between cross-border enterprises is another focus of tax audits. Interest-free or low-interest borrowings between affiliated enterprises are easily regarded by tax authorities as profit distribution in disguise and thus subject to special tax adjustments. In addition, the problem of capital weakness should not be ignored, i.e., enterprises hide profits by increasing debt financing (interest is deductible before tax) instead of equity financing (dividends are not deductible before tax), which is usually limited by debt-to-capital ratios in various countries.

Risk 4: Mismatch between permanent establishment risk and profit attribution

With the spread of telecommuting and digitalized operations, the risk of permanent establishment is becoming more pronounced. For example, frequent travel by employees of a Chinese parent company to an overseas subsidiary to provide technical support, or sales staff of an overseas subsidiary conducting business online in China for a long period of time, may be recognized by the local tax authorities as constituting a "permanent establishment", which may result in a requirement to pay local tax on the portion of the profits.

If you haveHong Kong Company Registration, Bank Account Opening, Annual Audit, Tax Audit, ODI Filing and Tax Complianceetc. needs, 👉 Welcome to sweep the code to add our online customer service (WeChat: jxhqcy890 / cell phone: 16625410105), to arrange for the manager to answer questions, to provide professional advice and full one-on-one service!

06.Save for a rainy day: your exclusive cross-border e-commerce tax compliance program

In the face of increasingly severe international tax environment and increasingly strict regulatory review, the cost of remediation after the fact far exceeds the cost of planning beforehand. The case of Lanshan Medical's tax reimbursement of nearly 200 million dollars proves once again that compliance is the lifeline for enterprises to go out to the sea.

We understand that every cross-border e-commerce and offshore business faces unique business models and tax challenges. That's why we customize our cross-border tax compliance solutions for you.

Don't let tax compliance become a "stumbling block" on your road to globalization. Consult our team of cross-border tax experts to get your customized compliance solution, so that your road to globalization will be more stable and farther!

Cross-border e-commerce there are many ways to plan, organized a detailed cross-border e-commerce tax compliance dry manual PDF, if there is a need for the boss can find me to get free ~ 👉 If you haveHong Kong Company Registration, Bank Account Opening, Annual Audit, Tax Audit, ODI Filing and Tax Complianceetc. needs, 👉 Welcome to sweep the code to add our online customer service (WeChat: jxhqcy890 / cell phone: 16625410105), to arrange for the manager to answer questions, to provide professional advice and full one-on-one service!

.

Cross-border e-commerce tax compliance pain points

1、 Two sets of accounts: the internal accounts are chaotic and lead to difficult assessment, while the external accounts are difficult to file tax returns due to tax evasion and tax evasion;

2. Low income from external accounts, difficulties in financing, investment, mergers and acquisitions and IPOs;

3, no ticket purchases, personal accounts in and out of large sums of money, suspected of money laundering, tax evasion boss sleepless nights;

.

Compliant Overseas and Domestic Equity Structures for Cross-Border Enterprises

1、Build a good in-country structure, that is, tax-saving and compliance

2, must set up a Hong Kong company as well as good positioning

3、Use of Hong Kong company offshore tax exemption policy

4. How is the store company built?

5、Why do we need to do offshore investment filing?

.

Cross-border e-commerce fiscal and capital rational planning

1. Normative design for procurement without and with tickets

2. Reasonable pricing of goods exported from Hong Kong companies to achieve both tax savings and compliance

3, the company structure flow, goods flow, financial flow, tax flow, capital flow, contract flow, bill flow reasonable planning management

4、 How to make cross-border e-commerce enterprises and bosses' income legal? How to plan for shareholders' dividends?

5. Need to share the cost of payroll for in-country employees

6、 Must do cross-border service tax-free record

.

If you haveHong Kong Company Registration, Bank Account Opening, Annual Audit, Tax Audit, ODI Filing and Tax Complianceetc. needs, 👉 Welcome to sweep the code to add our online customer service (WeChat: jxhqcy890 / cell phone: 16625410105), to arrange for the manager to answer questions, to provide professional advice and full one-on-one service!