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Transfer Pricing Services

Transfer Pricing Services
Transfer Pricing Services
Service Code : 16
Transfer Pricing Services

In present scenario the participation of multi-national companies in Indian economy has given rise to complex issues emerging from transactions entered into between two or more enterprises belonging to the same multi-national group.

Government of India has formulated a statutory framework to identify the reasonable and fair value of transaction and tax thereon.

In order to face the complexity of the foreign transactions of multi national companies in India, Government of India introduced a regulation under the name 'Transfer Pricing Regulation'.

The following are the important points to be considered for transfer pricing:
  • Each person or association who has involved in an international transaction should maintain an up-to-date record of each transaction as prescribed in the rules.
  • Income acquired by the company by means of any international transaction shall be calculated at arm's length price.
  • There are various methods to calculate the arm's length price, depending on the nature and type of the transaction, the nature of the group or the association involved, or any other features of the transactions involved.
  • The taxpayer can select the most appropriate method to be applied to any given transaction, but such selection has to be made taking into account the various factors prescribed in the Rules.
  • If there are two or more appropriate prices assumed for a certain transaction, the arm's length price will be calculated as the average of the prices.
  • At the end of a financial year, the company should submit the report of it in Form 3CEB duly audited by a Chartered Accountant in a prescribed time limit.
These Methods are
  • Comparable uncontrolled price method (CUP Method)
  • Resale price method
  • Cost plus method
  • Profit Split method
  • Transactional net margin method.