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Transfer pricing can be considered as the intercompany pricing agreement or arrangements between related companies, and usually applies to the transfers of tangible and intangible assets. When any business is conducted at international level, the tax department of both countries insists them to pay the tax for their income. Governments always attempt to earn more tax and business entities want the flexibility to save the tax. The arm's length principle mentioned in OECD (Organization for Economic Co-operation and Development) is implemented by most of the countries worldwide to set the transfer price (also known as transfer cost). It includes the guidelines for transfer pricing of for multinational co-operations and tax administrations. To compute ALP, five globally accepted methods are used and they are CUP, cost plus, resale price minus, profit split (including residual profit split) and TNMM. Most of the times, CBDT is also considered as an additional method for this. Now a days, there are various accounting firms set up to provide services in field of transfer pricing. They analyze transactions, agreements and dealings, etc. of the company to plan for the maximum saving in tax. Planning, documentation, dispute resolution, economic analysis, advanced pricing agreements and valuations are the facilities provided by them. They include team of well-educated and experienced professionals who work as per the client’s need. Transfer Pricing Services are helpful for all the organizations (business consultants, chartered accountants and lawyers) facing problem with tax, audit and etc. They are available locally and globally as well. Transfer Pricing Documentation is most important area which needs to be handled carefully. A small mistake in this can result in major penalties. You will get a chance to consult with the experts and they will suggest you the best suitable tax advice and fixation on Arm’s Length Price. The documentation is not same for every company so they will follow the transfer pricing law and concepts to create a best document for your company/firm. This requires a list of mandatory documents which is listed in Rule 10D (1). Here is the category of documentation involved: • Industry description and ownership structure. • Detailed information on financial estimates. • The profile of multinational enterprise and terms and conditions in the transactions. • Evidence of a compatibility assessment and uncontrolled transaction with third-party. • Explanation of the considered methods and details of transfer pricing adjustments. • Document with the reasons for rejection of substitute methods. • Description of performed functions, assets employed and risks assumed. In addition, any other firm related document will also be considered. Additional information can be useful for ALP calculation. Concept of transfer pricing was present in Indian income-tax law. However, the scope of provision was limited. To widespread this, a comprehensive regulations finance act was introduced in 2001. The new rule was based on the internationally accepted principles the arm’s length price as per OECD procedure. Other modifications such as dispute resolution panel, introduction of APAs and rationalization of penalties are symbols of a fair transfer pricing management. The changes in the law are a great sign of maturity in Transfer Pricing India. The changes in the law are a great sign of maturity in Transfer Pricing India and Transfer Pricing Documentation. For more information about Transfer Pricing Services visit jgarg.com
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