With a rise in cross-border transactions and stringent norms imposed by governments across the globe, transfer pricing has become one of the biggest tax risks for multi-national groups. Every transaction has a distinct profile and we focus on providing tailor-made solutions for such profiles.
Domestic transfer pricing
- Applicability of Transfer Pricing (“TP”) provisions was earlier limited to International Transactions only. With effect from April 1, 2013, the scope of Transfer Pricing provisions extended to “Specified Domestic Transactions (“SDT”).
- With the applicability of transfer pricing provisions on Specified Domestic Transactions, it is the obligation on the taxpayer to document and substantiate whether the price at which transaction takes place is the arm’s length price for such transaction.
- Section 92BA provides the meaning of Specified Domestic Transactions to which various other provisions relating to transfer pricing will apply.
International transfer pricing
- As per section 92B an international transaction means a transaction between two or more associated enterprises, either or both of whom are non-resident and such transaction is in the nature of purchase, sale or lease of tangible or intangible property or provision of services, or lending or borrowing money or any other transaction having a bearing on the profits, income, losses or assets of such associated enterprises.
- International transaction shall also include a mutual agreement or arrangement between two or more associated enterprises for the allocation or apportionment of, or any contribution to, any cost or expense incurred or to be incurred in connection with a benefit, service or facility provided or to be provided to any of such associated enterprises.
Transfer pricing audits and certification
- It is mandatory for all taxpayers, without exception, to obtain an independent accountant’s report in respect of all international transactions between associated enterprises or specified domestic transactions.
- The report has to be furnished by the due date of the tax return filing (i.e. on or before 30 November). The form of the report has been prescribed. The report requires the accountant to give an opinion on the proper maintenance of prescribed documents and information by the taxpayer. Furthermore, the accountant is required to certify the correctness of an extensive list of particulars prescribed by Form 3CEB
Formulating transfer pricing policies
- Transfer pricing policy dictates the approach taken by the two companies when determining the price for the product or service. Companies incorporate different transfer pricing policies to achieve different objectives.
- Our transfer pricing professionals apply in-depth knowledge and experience to help you develop the transfer pricing documentation your company needs to address the ever-changing global transfer pricing compliance requirements. We understand what the tax authorities are looking for, and we have the experience and tools necessary to prepare consistent, accurate, and timely transfer pricing documentation.
Benchmarking and documentation services
- Benchmarking studies are the critical part of any transfer pricing documentation file or policy and are mainly used to test the arm’s length nature of the related party transactions in preparing a transfer pricing documentation file, set the mark-up attached to the transactions carried out between related parties as part of tax planning exercises and determine the arm’s length range deemed to provide an estimate of an arm’s length price.
- The purpose of benchmarking studies is to determine the general conditions surrounding the transactions conducted by third parties on a given market. Such studies help elicit a range of values, i.e. the so-called arm’s length range or mark-up range.