Transfer Pricing Service

In accordance with the Indian Transfer Pricing Regulation, the arm’s length nature of the transactions must be supported by the transfer pricing method that is deemed to be the most appropriate.

In India, transfer pricing regulations apply to any cross-border transaction between two affiliated or related companies. Concerns concerning price fixing in intra-group transactions have grown as a result of the expanding economic activity of multinational groups around the world. By way of the Finance Act of 2001, the Indian government established the Transfer Pricing Regulation.

 

In accordance with the Indian Transfer Pricing Regulation, the arm’s length nature of the transactions must be supported by the transfer pricing method that is deemed to be the most appropriate.

The Many Transfer Pricing Techniques The following are prohibited by the Indian Transfer Pricing regulation:

  • comparable unregulated pricing technique;
  • resale price approach;
  • cost plus approach;
  • Profit-sharing strategy;
  • method of transactional net margin; and
  • Any other approach the Board deems appropriate

The laws governing transfer pricing in India have grown more complicated over time. On transfer pricing-related problems, there has been a lot of litigation during the past few years. These challenges encompassed a wide range of themes, from easier ones like comparability to more difficult ones like re-characterization, marketing intangibles, cost-sharing agreements, financial transactions, etc. The intricacy of the transfer pricing provision has been further enhanced with the introduction of base erosion and profit shifting (BEPS). Businesses must therefore ensure that their related party transactions comply with legal transfer pricing principles.

With our extensive knowledge and global presence at SalahKaro, we are able to comprehend the complexities of transfer pricing regulations both domestically and internationally. We then offer end-to-end solutions to our clients, which include both domestic and international businesses.

Our team of experts collaborates directly with the customers to help them understand and control the effects of both domestic and international related party transactions. We offer transfer pricing benchmarking, transfer pricing paperwork, and transfer pricing planning for new related party transactions.

Here are some of our main offerings:

  • Giving businesses advice on creating efficient transfer pricing plans while taking into account their type of business operations and related party activities;
  • Examining the nature of business activities and transactions involving related parties and recommending the most suitable transfer pricing techniques;
  • Assisting in the upkeep of the transfer price records, such as the Form 3CEB report, the master file, the transfer pricing research report needed by Indian transfer pricing legislation, and the submission of the same with the Indian Tax Authorities;
  • Representation before the Indian Tax Authorities regarding the transfer pricing issues under audit or scrutiny;
  • Representation before the Commissioner of Income-tax (Appeals) and the Dispute Settlement Panel;
  • Transferring prices with care.
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FREQUENTLY ASKED QUESTIONS

Following are the transfer pricing methods to calculate the arm’s length price:

  • Transactional Net Margin Method
  • Resale Price Method
  • Cost Plus Method
  • Comparable Uncontrolled Price Method
  • Profit Split Method

The taxpayers shall maintain all the information and documentation with respect to their transactions with associated enterprises. Rule 10D of the Income Tax Rules prescribes the information and documents that shall be maintained by the taxpayers.

Safe Harbour refers to the circumstances where the income tax authorities shall accept the transfer price or the income deemed to accrue or arise u/s 9(1)(i) as declared by the assessee. Thus, safe harbour rules indicate certain circumstances where the income tax authorities shall accept the transfer price or income as declared by the assessee.

Advance Pricing Agreement (APA) is an agreement between the income tax authority and the taxpayer on an appropriate transfer pricing methods entered for specific transactions over a fixed period of time.

The validity of the advance pricing agreements shall be such as is specified in the agreement which shall not exceed 5 consecutive previous years. The advance pricing agreement shall be binding on:

The person in whose case and the transaction in respect of which the agreement has been entered and The Principal Commissioner or the Commissioner and all the income tax authorities that are subordinate to him in respect to the said person and the transaction.

Primary adjustments in relation to the transfer price means the determination of the transfer price as per the arm’s length price resulting in an increase of the total income or reduction of the loss. Whereas, secondary adjustments relate to the adjustments in the books of accounts of the assessee and the associated enterprise to reflect the actual allocation of the profits between them that is consistent with the transfer price as determined because of the primary adjustment.

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