Transfer Pricing Forum, Transfer Pricing Rules, Transfer Pricing Applications, Transfer Pricing Software

Transfer Pricing

Transfer pricing refers to the pricing of contributions transferred within an organization. For example, goods from the production division may be sold to the marketing division, or goods from a parent company may be sold to a foreign subsidiary. Since the prices are set within an organization , the typical market mechanisms that establish prices for such transactions between third parties may not apply. The choice of the transfer price will affect the allocation of the total profit among the parts of the company. This is a major concern for fiscal authorities who worry that multi-national entities may set transfer prices on cross-border transactions to reduce taxable profits in their jurisdiction. This has led to the rise of transfer pricing regulations and enforcement, making transfer pricing a major tax compliance issue for multi-national companies.

Do you :

	Need to better understand regional TP Tax Audits?
	Want to plan your taxes through more efficient TP techniques like incentives in using Malaysia as a business hub or realignment of group profits?
	Require a more in-depth understanding of TP audits components from common irregularities to documentation requirement?
	Need to respond to a tax authority transfer pricing audit / enquiry?
	Want reasonable assurance that your internal controls over transfer pricing are sufficient?
	Want to know what are the "best practices" for managing your worldwide transfer pricing policies and procedures?

The discussion in this section explains an economic theory behind optimal transfer pricing with optimal defined as transfer pricing that maximizes overall firm profits in a world with no taxes. In practice a great many factors influence the transfer prices that are used by multinationals, including performance measurement, capabilities of accounting systems, import quotas, customs duties, VAT, taxes on profits, and simple lack of attention to the pricing.

The appropriate transfer pricing strategy balances opportunity and risk management, weighing effective tax-rate optimizations against fiscal-authority challenges and the costs of compliance.Tax authorities in India have stepped up their focus on transfer pricing. The Income-tax Act, 1961 now has specific regulations relating to transfer pricing.finance and tax professionals with extensive experience in transfer pricing and international tax issues. Our proprietary software for transfer pricing has an exhaustive database of comparable companies across a wide spectrum of industries. This enables us to undertake cross border transfer pricing studies from within India, which is then reviewed by offices abroad, resulting in substantial cost savings to the client.
Transfer pricing compliance may pose a significant burden for SMEs and keeping this in mind, threshold limits have been provided for TP audits and to maintain detailed TP documentation. The tax payer is not relieved of the responsibility of demonstrating that his/her international transactions are at arm’s length. To simplify the requirements for SMEs and reduce the workload of revenue officers, a more liberal threshold limit and condition needs to be introduced.
In business, low profits in the short-run are not unusual as they may be part of the business strategy itself. Recognition of business strategies as a comparability factor in Indian TP regulations will lead to an acceptance that a tax payer can incur losses under arm’s length conditions

Tax Payment

The Income Tax Act, 1961, as an individual, you have to pay advance tax if the total tax payable in the relevant financial year exceeds Rs 5,000. Apart from the regular sources of income, like salary, business/profession and other sources like interest, advance tax is also payable on non-regular income like capital gains.Advance tax has to be paid before the relevant financial year comes to an end. So, for the year 1 April 2001 to 31 March 2002, any amount that is paid before 31 March