Latest Expert Exchange Queries
sitemapHome | Registration | Job Portal for CA's | Expert Exchange | Currency Converter | Post Matrimonial Ads | Post Property Ads
News shortcuts: From the Courts | News Headlines | VAT (Value Added Tax) | Service Tax | Sales Tax | Placements & Empanelment | Various Acts & Rules | Latest Circulars | New Forms | Forex | Auditing | Direct Tax | Customs and Excise | ICAI | Corporate Law | Markets | Students | General | Indirect Tax | Mergers and Acquisitions | Continuing Prof. Edu. | Budget Extravaganza | Transfer Pricing
Popular Search: VAT Audit :: due date for vat payment :: ACCOUNTING STANDARDS :: TAX RATES - GOODS TAXABLE @ 4% :: ACCOUNTING STANDARD :: ARTICLES ON INPUT TAX CREDIT IN VAT :: empanelment :: ICAI offer Get Windows 7,Office 2010 in Rs.799 Taxes :: cpt :: TDS :: form 3cd :: list of goods taxed at 4% :: Central Excise rule to resale the machines to a new company :: articles on VAT and GST in India :: VAT RATES
Transfer Pricing »
 US, Mexico agree to transfer pricing framework for maquiladoras
 Indian tax official sees expanded role for BEPS inclusive framework, addresses transfer pricing local file
  Transfer Pricing analysis of professional services provided by related-party individuals and corporations
 Transfer Pricing analysis of professional services provided by related-party individuals and corporations
 FinMin to issue rules for norms under BEPS
  CBDT signs five unilateral advance pricing agreements
 UN tax committee to consider major updates to transfer pricing manual, model tax treaty
 CRA intensifies scrutiny of complex transfer pricing tax avoidance scheme
 New transfer pricing requirements in Poland
 Additional Tax Assessment Following Transfer Pricing Control Audit
 Aligning customs with transfer pricing operations

India, US set to map out way to end transfer pricing cases in court
February, 09th 2015

More than 100 tax disputes involving Indian associates of US companies such as IBM and Microsoft are set to be settled out of court by April this year with the income tax department and the US Internal Revenue Service identifying disputes in the contract research, IT and software sectors for resolution under a bilateral tax treaty.

The disputes that would be resolved through discussions between authorities in both countries would cover tax claims on cross-border transactions of multinational companies called transfer pricing adjustments.

Sources in the government told FE that the 100-odd cases identified would include tax demands on the same company for different years. India’s tax treaty with the US allows settlement of tax disputes involving double taxation through talks between the tax authorities.

IBM, for example, faces an additional R11,000 crore to its taxable income for 2006-07, while Microsoft faces an addition to its income by R5,535 crore for 2006-07 to 2009-10.

Cisco, Google, Honeywell, AT&T, Dell, Intel, Alcatel and Tesco are among the large multinational companies that run contract research and development centres in India.
The outcome of such bilateral settlement under the Mutual Agreement Procedure (MAP) on how much tax should be levied in each country on a specific transaction is not binding on a company. If the taxpayer accepts the outcome, the solution becomes binding on both the company as well as the tax authorities.

The profitability of contract research and development centres set up in India by global IT and IT-enabled services firms has been a major area of dispute between them and the Indian tax authorities, which demand higher taxes by attributing a higher profitability to such units.

The government had already made several changes in transfer pricing norms to reduce litigation but the disputes already in courts had set some kind of precedence for tax officers who tend to repeat the same approach in assessment of income in subsequent years too.

According to industry experts, the tax department has been attributing about 30-40% profitability to contract research units, while it was much less on the ground. The higher profit margin estimate so far used enabled the tax authorities to make upward adjustments in the value of the service rendered by the captive unit to its overseas parent, leading to a higher tax outgo for the Indian unit.

Transfer pricing adjustments in India lead to double taxation of the global IT firm outsourcing business to Indian subsidiaries. Tax authorities in the country where the MNC parent is located often allow deduction of business expenditure on the outsourced work only at the value of the transaction claimed by the Indian captive unit, not at the value upwardly adjusted by the Indian tax authority. The amount adjusted by the Indian tax department gets taxed twice. India and the US are now set to resolve disputes in this area through MAP.

Home | About Us | Terms and Conditions | Contact Us
Copyright 2016 CAinINDIA All Right Reserved.
Designed and Developed by Binarysoft Technologies Pvt. Ltd.
Binarysoft Technologies - Privacy Policy

Transfer Pricing | International Taxation | Business Consulting | Corporate Compliance and Consulting | Assurance and Risk Advisory | Indirect Taxes | Direct Taxes | Transaction Advisory | Regular Compliance and Reporting | Tax Assessments | International Taxation Advisory | Capital Structuring | Withholding tax advisory | Expatriate Tax Reporting | Litigation | Badges | Club Badges | Seals | Military Insignias | Emblems | Family Crest | Software Development India | Software Development Company | SEO Company | Web Application Development | MLM Software | MLM Solutions