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: ARTICLES ON INPUT TAX CREDIT IN VAT :: Central Excise rule to resale the machines to a new company :: cpt :: VAT Audit :: TDS :: due date for vat payment :: form 3cd :: ACCOUNTING STANDARD :: articles on VAT and GST in India :: ACCOUNTING STANDARDS :: list of goods taxed at 4% :: ICAI offer Get Windows 7,Office 2010 in Rs.799 Taxes :: VAT RATES :: empanelment :: TAX RATES - GOODS TAXABLE @ 4%
 
 
News Headlines »
 Securities excluded from GST ambit in revised Bill
 GST dilemma: Hope fades for new tax regime
 5nance.com launches tax investment platform
 Is government tapping your phone?
 Income tax department to use analytics to look for discrepancies in bank accounts
 GST Council fails to break deadlock over indirect tax regime, next meet on Dec 11 and 12 to hammer out differences
 Invoking Writ Jurisdiction For Income Tax Matters
 How to file income-tax returns online
 How Income Tax Returns Are Scrutinised
 All About New Income Disclosure Scheme to make Demonetisation successful
 Your deposit may draw income tax notice

Clear tax rules for R&D are welcome
July, 02nd 2013

The finance ministry has done well to clear the confusion on how R&D centres and back-offices of multinational companies (MNCs) would be taxed. The new set of guidelines by the Central Board of Direct Taxes (CBDT) will lower tax disputes and not tarnish India's appeal as an R&D hub. The relief is on two counts. One, CBDT has eased the norms for development centres to qualify as contract R&D centres.

Disputes arose as taxpayers insisted that they were contract R&D service providers bearing insignificant risks, while transfer pricing officers held otherwise, and sought to attribute higher profits to the Indian operations. More leeway will soften the tax blow. Two, these units do not have to mandatorily use the profit-split method to compute transfer prices.

Such a fiat would have meant quantifying the relative contribution of the parent and the captive R&D centre to the profits of the MNC. And adjustments would arbitrary in the absence of relevant data. CBDT's revised circular provides clarity on the principles to distinguish between three categories of R&D centres: entrepreneurial, costsharing and contract R&Ds.

This will prevent arbitrary tax demands. The larger point is that it is conceptually wrong for the tax authorities to demand a share of the profits arising from R&D at a captive unit. That would be the opposite of applying the arm's-length principle to the pricing of services procured from an Indian captive. India exported software worth $76 billion in 2012-13, a third from captives. We need to attract investment in such captives.

This calls for both certainty and clarity in the tax regime. MNCs also need simple rules that they can follow in pricing their services while doing business with their parent or subsidiaries overseas. A "safe harbour" brooks no delay.

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

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