Page 44 - Quick Insights Book 2022

Chap. 8 – International Taxation

TRANSFER PRICING knowledge and sound advice is paramount. Opportunities
are certainly there but executives need advisers/Chartered
In the last century, global trade consisted of cases of import Accountants who can bring in a global outlook, understand the
and export of raw materials and of finished goods between business challenges and have deep expertise about the relevant
independent parties. With the advent of the industrial revolution industry.
and later on revolutions in transportation and communication,
moving materials, labour & funds across geographical and Some of the solutions which may be provided by Chartered
political boundaries became easier and efficient. Companies Accountants in Transfer Pricing include:
expanded rapidly to open subsidiaries and affiliates resulting in  Business model study - Performing benchmarking study
emergence of Multinational Enterprises (MNEs), spread out in to ensure that all international transactions entered by
various countries.
persons are maintained at arm’s length price;
An accompanying development has been the increasing volume
of transactions within the group called intra-firm transactions.  Documentation compliance – Assistance maintenance
The structure of transactions within an MNE group– associated in keeping information and of documents required
enterprises is determined by a combination of the market and by persons involving international transactions with
associated enterprises;
group driven forces which can differ from the open market
between independent entities.  Issuance of Chartered Accountants Certificate i.e., Form
No. 3CEB - Required by persons involving international
Intra-firm trade is growing steadily and accounts for major
international transactions. The obvious consequence is that a transactions with associated enterprises;
large and growing number of international transactions are no  Facilitating complete compliance with CbCR and Master
longer governed entirely by market forces, but by forces which File requirements
are driven by common interests of the entities of a group.
 Representation before the revenue authorities including
Also many MNEs and financial services organizations are appellate level and tax tribunal;
moving their back office operations to India to take advantage
of huge skill available and as well as the cost arbitrage.  Assistance with competent authority negotiations and
mutual agreement procedures;
Evolution of Transfer Pricing at India: India started integrating
its economy with global economy in 1991. This has led to  Advisory Services such as -
increased cross border flow of goods, services, funds and even ● Pricing risk transfers in intercompany transactions
intangibles and a large inflow of Foreign Direct Investment. (e.g., market price volatility, risk or counterparty
Many of the Indian companies have also become large global credit risk);
players with overseas subsidiaries in many tax jurisdictions.
Transfer pricing in India was introduced in 2001 for curbing ● Pricing intangible assets, and modelling their value
tax avoidance by laying down norms for “income arising from over time;
international transactions” to be computed at “arm’s length ● Setting interest rates, defending levels of
price”.
intercompany debt, and pricing inter-company
Transfer pricing encompasses areas such as inter- company guarantees using credit rating models;
pricing arrangements between related business entities, ● Determining arm’s length cost sharing and buy-in
including transfers of intellectual property, transfers of tangible payments for technical know-how;
goods, services and loans and other financing transactions.
● Establishing inter-company charges for central
Reiterating India’s commitment to implement OECD’s BEPS services;
Action Plan 13, the CBDT has released in respect of Country-
by-country reporting (‘CbCR’) and Master File (‘MF’) as required ● Implementation of advance pricing arrangements
to be furnished to tax authorities in terms of Section 286(8) covering a variety of different types of transactions.
and Section 92(D) of Income-tax Act. The rules are 10DA and
Rule 10DB of the Income-tax Rules, 1962 (the Rules).
All this provides immense opportunities to Chartered
Accountants who are well positioned to provide end-to-end
solutions to help companies manage the whole process.
Thus, in this environment, where change is rapid and
international transaction flows are high, local transfer pricing

Quick Insights on Professional Opportunities for Chartered Accountants 31