Transfer Pricing

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Transfer pricing is the process of determining the price for goods and services that are exchanged between several entities within the multinational enterprise. The main aim of transfer pricing is to allocate profits fairly among different entities by considering the contributions made by each entity.

Transfer pricing has gained attention from tax authorities across the globe in recent years. As a result, there is now a complicated regulatory environment for transfer pricing with a wide range of rules and regulations in many countries.

tranferpricing

Transfer pricing has gained massive attention from tax authorities across the globe in recent years and there is a complicated regulatory environment for transfer pricing with a wide range of rules and regulations in many countries. So, in order to ensure that their businesses abide by transfer pricing laws, organisations need international transfer pricing Benchmarking study and Litigation support. These services can also helpful for subsidiary of the foreign company.

Willing to make yourself familiar with the concept of transfer pricing? Here is an overview on the same:

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Why Choose BC Shetty & Co For Transfer Pricing Services

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Frequently Asked Questions

Transfer pricing is the price set for transactions between related entities within multinational enterprises (MNEs). MNEs manipulate these prices to shift profits to low-tax countries, reducing their overall tax burden. This practice, differing from arm’s length pricing between independent entities, often leads to tax avoidance and revenue loss for high-tax countries, making it a key concern for tax authorities.

Transfer pricing is crucial as it:

  • Ensures compliance with tax laws and avoids penalties.
  • Helps businesses allocate profits fairly across jurisdictions.
  • Minimizes the risk of tax disputes and audits.
  • Supports efficient global business operations and financial planning.

Companies mainly opt for transfer pricing to minimize the overall tax burden of the parent company. Companies charge a higher price for divisions in high-tax countries while charging a lower price for divisions in low-tax countries. This helps them in maximising their business profitability.

The key principles include:

  • Comparable Uncontrolled Price (CUP)
  • Resale Price Method (RPM)
  • Cost Plus Method (CPM)
  • Profit Split Method (PSM)

For transfer pricing compliance, businesses must maintain detailed documentation as per Rule 10D of Income Tax Rules. This includes:

  • Ownership details: Structure, voting power, and shareholding.
  • Business profiles: Description of the MNC group and associated enterprises.
  • Transaction details: Nature, terms, pricing, and comparability analysis.
  • Financial data: Budgets, forecasts, and economic analysis.
  • Pricing methods: Arm’s length price determination and assumptions.
  • Adjustments & compliance: Transfer price adjustments and tax implications.

This ensures transparency in international and specified domestic transactions.

At BC Shetty & Co., we provide professional guidance on:

  • Transfer pricing documentation and compliance.
  • Defending against tax audits and assessments.
  • Developing pricing strategies that align with regulations.
  • Advising on tax-efficient business structuring.

Our team ensures you meet regulatory requirements while minimizing tax risks.

If the Income Tax Department, through the Transfer Pricing Officer (TPO), believes that the transfer pricing charged by an Indian entity to its overseas associated enterprise is not at arm’s length, the officer has the authority to determine the appropriate transfer price using approved methods. Based on this assessment, the TPO can make adjustments to the pricing, which may result in an additional tax liability for the assessee. This process is known as a transfer pricing adjustment and can have financial implications for the taxpayer.