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) | Placements & Empanelment | Various Acts & Rules | Latest Circulars | New Forms | Forex | Auditing | Direct Tax | Customs and Excise | ICAI | Corporate Law | Markets | Students | General | Mergers and Acquisitions | Continuing Prof. Edu. | Budget Extravaganza | Transfer Pricing | GST - Goods and Services Tax
Latest Expert Exchange
« Corporate Law »
  Are we maintaining documents and records as required under GST Laws?
 Are we maintaining documents and records as required under GST Laws?
 Businesses tipped on new income tax law
 Will Budget Make Changes In GST Laws
 Government firm on tax law changes, relents on tribunal postings
 Income Tax relief on money in single parent’s account may lead to tax evasion: Law panel
 Law panel against income tax relief for single parents
 Maintenance of Accounts and other record in GST Law
 Parliament Votes to Extend Value Added Tax Law
 Taxation Laws (Second Amendment) Act, 2016 ​​​​​​​​​​​​​​​​​​​​​​​​​​​​
 Glimpse of Invoices Revised Model GST Law

Steering Indian tax laws towards safe harbours
April, 01st 2013

True to his commitment towards enabling a non-adversarial tax administration, especially for transfer pricing, Finance Minister P. Chidambaram, in his budget speech, set March 31, 2013, for submission of all expert committee reports. The transfer-pricing safe harbours are expected in the coming months.

The safe harbour concept was introduced into transfer pricing regulations in 2009 to provide a degree of certainty to taxpayers. However, despite numerous industry consultations by the Board, the safe harbours have not been prescribed till date. In the meantime, transfer pricing disputes and the resulting adjustments in appeal have pushed India to the top-three most litigious countries in transfer pricing.


A ‘safe harbour’ refers to circumstances in which the income-tax authorities shall accept the transfer price declared by the taxpayer.

In practice, a safe harbour involves providing guidance on activities and margins to ensure revenue authorities accept the transfer price without much scrutiny. Under Safe Harbour Rules, transfer prices are automatically accepted by revenue authorities, thereby reducing or eliminating the compliance burden and uncertainty.

Globally, several countries have prescribed safe harbours. The Organisation for Economic Cooperation and Development (OECD) issued draft guidance in September 2012 on the formulation and implementation of safe harbours.

The guidance also prescribes sample memorandum of understanding (MoU) for the competent authorities of treaty countries to establish bilateral safe harbours for low-risk manufacturing, distribution, and research and development services.


The main benefits of Safe Harbour Rules include administrative simplicity for the tax department, and relief from onerous annual documentation and transfer pricing certainty for the taxpayer.

These are of special significance to companies in the information technology and business process outsourcing (BPO) sectors. Taxpayers engaged in cross-border, related-party IT-ITES services have witnessed a spate of high-pitched transfer pricing assessments over the past eight years, thanks to transfer pricing audits by revenue authorities. Given the current level of transfer pricing litigation, the Safe Harbour Rules are something to watch out for.


Although the nature of safe harbours is not available in the public domain, they are generally expected to be for the IT-ITES sector, corporate guarantee fees, contract R&D, and interest on loans.

At present, various corporates are filing their formal Advance Pricing Agreement applications, and it will be interesting to see at what level the safe harbours are pegged, and the cost-benefit of the APA scheme vis-à-vis the safe harbours.

Home | About Us | Terms and Conditions | Contact Us
Copyright 2018 CAinINDIA All Right Reserved.
Designed and Developed by Binarysoft Technologies Pvt. Ltd.
Software Work Flow Workflow Software Software Automation Workflow automation Software Design Workflow Design Business Work Flow Workflow automation tools

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