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New Transfer Pricing Method in India – A Quick Glance
 

New Transfer Pricing Method in India – A Quick Glance

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With various small corporations evolving into global enterprises, compliance to the constantly changing international laws and regulations is fast becoming a complex and pricey undertaking for ...

With various small corporations evolving into global enterprises, compliance to the constantly changing international laws and regulations is fast becoming a complex and pricey undertaking for transfer pricing issues

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    New Transfer Pricing Method in India – A Quick Glance New Transfer Pricing Method in India – A Quick Glance Document Transcript

    • New Transfer Pricing Method in India – A Quick GlanceWith various small corporations evolving into global enterprises, compliance to the constantly changinginternational laws and regulations is fast becoming a complex and pricey undertaking for transfer pricingissues. Heavy penalties, extensive audit and inspection activity, have made it imperative to be up to dateto stay away from costly penalties.The Indian Tax Administration has introduced a new transfer pricing method which uses the ‘othermethod’ for determining Arm’s length Principle (ALP) for international transactions. As per the new rule10AB to the Income-tax Rules, 1962, the other method for determination of the arm’s length price inrelation to an international transaction shall be any method which takes into account the price whichhas been charged or paid, or would have been charged or paid, for the same or similar uncontrolledtransaction, with or between non-associated enterprises, under similar circumstances, considering allthe relevant facts.The new transfer pricing rule allows taxpayers more flexibility to calculate Arm’s Length Principle forroutine as well as non-routine transactions such as reimbursements and collective transfers of tangibleand intangible properties. Rule 10 AB which leans toward a price based method (instead of profit basedmethod) adds credibility to information related to commercial transactions, data on market conditionsand other factors that affect the arm’s length price of a transaction.Transfer Pricing Rule 10AB is applicable ● During uncontrolled transactions involving investment banking, logistics ● While using tenders or price quotations to establish the arm’s length principle during a loan/ guarantee transaction ● When using the standard rate cardsThe “other method” rule applies to Assessment Year 2012-13 and the subsequent years and is effectivefrom April 1 2012.There can be significant risks for the unprepared especially in intercompany transfer pricing where
    • every transaction needs to be analyzed under a different set of circumstances. It is thereforeadvantageous to have a trusted partner who can provide you with exceptional assistance and ensurethat you are up to date with the changing transfer pricing regulation. You can also get valuableassistance in other areas of your business like regulatory filings, sas compliance, internationalaccounting, etc.Read Also On: Tax For Expats, EU VAT rules