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Transfer Pricing Services in India

Transfer Pricing Services in India

Increased number of intercompany transactions has made transfer pricing a leading risk management issue for global businesses.

The litigation, with regard to transfer pricing in India, is humongous. We aim to facilitate companies by providing practical transfer pricing Services & Solutions that are aligned to their global business and objectives and also provide controversy management.

 

Transfer Pricing Services

Indian Transfer Pricing Support Advisory

  • Transfer Pricing Advisory services for new transactions/existing transaction including:
    • Intangibles
    • Loans and Guarantees
    • Intra Group services
    • Research and Development activities
    • Restructuring or Reorganization
    • Purchase or sale of marketable securities etc
  • Transfer Pricing Advisory can be related to:
    • Formulation and Implementation of domestic and global transfer pricing policies including pricing (mark up and pricing methodology)
    • Conducting Functional analysis (including Functions, Assets and Risks Analysis)
    • Advance Pricing Agreement
    • Mitigation of Transfer Pricing Risks

International Benchmarking Services

  • International Benchmarking is usually conducted where foreign entity is treated as a tested party for the purpose of computation of arm’s length price.
  • Benchmarking services are carried out with a wide range of global, private, and public comparable company databases so the search for private and public company data to find and identify the similar comparables for international transaction.
  • Through our global alliances we have the capability to provide international benchmarking support for Multinational Companies in the following global databases for foreign tested parties or for benchmarking special transactions
  • RoyaltyStat
  • Amadeus
  • KTMine
  • BvD
  • Thomson Reuters

Managing Transfer Pricing Controversy

  • Assistance in all the stages the entire lifecycle of Advance Pricing Agreement (APA) comprising of pre filing consultation, filing of APA application, site visits, data gathering, negotiation, finalization and administration (filing of annual compliance report).
  • Representation before Transfer Pricing Officer (TPO), Commissioner of Income Tax (Appeals), Dispute Resolution Panel (DRP) and Income Tax Appellate Tribunal (ITAT).
  • Assistance in Mutual Agreement Procedure (“MAP”)
  • Assistance in application of Safe Harbour Rules

Transfer Pricing Documentation & Compliances

  • Preparation of detailed transfer pricing documentation relating to international and specified domestic transactions as required u/s 92D read with Rule 10D of the Rules
  • Issuance of Accountant’s Report / Transfer Pricing Certification (Form 3CEB) as required u/s 92E read with Rule 10E of the Rules
  • Assistance in Preparation and submission of Master File and Country by Country reports (CBCR) in accordance with OECD's BEPS Action Plan 13

What is Advance Pricing Agreement (APA)?

The Advance Pricing Agreement is an agreement signed between the Central Board of Direct Taxes (CBDT) with the Taxpayer, determining the arm’s length price or specifying the manner in which the arm’s length price is to be determined, in relation to an international transaction. The agreement shall be valid for a period of 5 consecutive previous years. Such agreement shall be binding on the taxpayer and on the Principal Commissioner/Commissioner, and the income-tax authorities subordinate to him, in respect of the said person and the said transaction. There are three types of APAs i.e. Unilateral, Bilateral and Multilateral.

What is Country-by-Country (CbC) reporting?

The Country-by-Country Reporting (CbCR) consists of a wide range of international measures framed to combat tax avoidance. The reports are required to include revenues, profits, taxes paid and certain measures of economic activity. This report has to be submitted by parent entity of an international group to the prescribed authority in its country of residence. Under Section 286 of the ITA, CbCR is mandatory for certain MNEs categories.

What is BEPS Action Plan 13?

Base Erosion and Profit Shifting (BEPS) Action Plan 13 sets the minimum standard for transfer pricing documentation. It has defined a three-tiered standardized approach for transfer pricing documentation containing master file, local file and Country-by-Country Report.

  • a) Local File:- Provide an entity and transaction level transfer pricing analysis for each jurisdiction. It is to be filed locally with the tax authorities in each jurisdiction
  • b) Master File:- Provide a high-level view of a company’s business operations and global transfer pricing policies. It is to be filed locally with the tax authorities in each jurisdiction
  • c) Country-by-Country Report:-Provide a global financial snapshot of a multinational enterprise. It shall be filed by the ultimate parent company in tax jurisdiction.

What is Transfer Pricing Certificate?

The taxpayer is required to get the transfer pricing certificate (Form 3CEB) signed from a chartered accountant u/s 92E of the Act where the taxpayer has entered into international transaction with Associated Enterprise irrespective of the quantum involved. In case of Specified Domestic Transactions, the threshold is INR 20 crore to get the certificate signed from a Chartered Accountant. The form contains 25 clauses which are divided into 3 parts – Part A) General information Part B) Details of international transactions, value involved and method employed and Part C) Details of Specified Domestic Transactions, value involved and method employed.

 

What are some methods to determine the arm’s length price?

Section 92C of the Act has prescribed six methods to compute the arm’s length price which are selected based on the nature of transactions and availability of comparable details. The methods are:-

  • Comparable uncontrolled price method (CUP);
  • Resale price method (RPM);
  • Cost plus method (CPM);
  • Profit split method (PSM);
  • Transactional net margin method (TNMM) and
  • Such other method as may be prescribed by the Board.

The ALP of any transaction can be determined by using any one of the prescribed methods that is the most appropriate for the transaction in question.