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
« Transfer Pricing »
 Move court only on question of law in transfer pricing cases: High Court
 CBDT proposes clear-cut timelines under transfer pricing
 Taxman disallows AMP deductions sought by MNCs
 Transfer Pricing Dispute Resolutions in India: New Relaxations
  CBDT to accept transfer pricing MAP sans riders
 Indian Subsidiary Held To Be A Dependent Agent PE – Transfer Pricing Study Considered Inadequate
  New rules to cut transfer pricing disputes
 Transfer pricing review and adjustments in Germany
 Indian advance pricing agreement uses customs value as arm’s length price
 Indian advance pricing agreement uses customs value as arm’s length price
  How advance pricing agreement helps India-Singapore business ties

MNCs will have to disclose more about transfer pricing
June, 28th 2016

Nations that rely on income tax from multinational corporations (MNCs) have long been plagued by base erosion and profit shifting (BEPS). This refers to shifting of profits from places where an economic activity takes place to low- or no-tax locations, resulting in little or no corporate tax being paid in either country. The Organisation of Economic Cooperation and Development (OECD) action plan calls for changes in international tax rules to ensure profits are taxed in places of the economic activity. KPMG’s Sean Foley discusses the possible impact of this framework.

Q. How will the BEPS plan, which could be implemented in India, impact transfer pricing?
It will impact it in at least three ways. First, it will create a lot of transparency and information. The recommendations require MNCs to provide more information on their transfer pricing and profit-allocation activities. Second, MNCs will need to disclose where the economic value is being added. Third, we anticipate that the first two changes will create more disputes, leading to more transfer pricing adjustments. And when you increase the profits earned by an MNC in India, you should have an offsetting somewhere else. That needs two governments to discuss and agree so that we don’t get double taxation. We are concerned that this will lead to more disputes, which can adversely impact international businesses.

Q. Pricing of intellectual property (IP) has seen a lot of disputes and the BEPS protocol specifically addresses this.
There are two areas where IP was the focus of BEPS. The first was on substance, i.e. who is controlling the development of the IP. On that, agreement was reached. But the area where agreement was not reached was on how to value IP. It is difficult to value things like brands, trademarks, goodwill and marketing lists. There was a view that we must have extraordinary measures, but governments could not agree on this.

Q. India and the US have the mutual agreement procedure treaty, under which companies have worked out advance rulings on their transfer pricing liability. How have such treaties worked?
The US-India discussions broke down. They were unable to agree on dozens of cases regarding adjustments made by transfer pricing officers. Last year, the US and India agreed on 70-odd cases. By 2015-end, the US said they would start accepting advance rulings. India has reached an agreement on transfer pricing liabilities with MNCs for, say, the next five years. It has done this with about 50 companies. So there has been some success.

Q. What transfer pricing issues do MNCs face in India?
Most operations in India involve routine functions like a BPO software development. MNCs do not think these add value. Indian officers have tried to set up adjustments far higher than the cost MNCs attribute to them. Here, the disputes are disagreements on the price of what is taxed and not on profit shifting.

Home | About Us | Terms and Conditions | Contact Us
Copyright 2018 CAinINDIA All Right Reserved.
Designed and Developed by Binarysoft Technologies Pvt. Ltd.
Article Management Solutions System Article Management Software S

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