When multinationals proceed through cross border transactions, tax authorities on both sides would like to make sure that they get their fair share of tax. Transfer Pricing regulations are only to achieve this goal. But does transfer pricing means pricing of goods? Well, here you need to have a clear understanding of Transfer Pricing. Hence, go through the article as we have mentioned everything you should know about Transfer Pricing and International taxation.
At the first place, let's talk about what is transfer pricing,
Transfer pricing means price charges for goods or services provided. However, under the tax, in common parlance, Transfer Pricing is considered as the value attached to goods or services when the transaction proceeds between two related/associate parties whether international or domestic.
Example: Suppose company A processes and produces apples. Company B acts as the distributor and seller of the same product. Company C owns both companies A and B. As company C owns both companies A & B, therefore, for the purpose of Transfer pricing provisions under Income Tax Act, 1961, Company A and B is considered as related/associate entities due to common control. So now, transactions of sales of apple to Company B by Company A shall be subject to transfer pricing provisions of Income Tax Act, 1961.
Indian Finance Ministry has implemented the Transfer Pricing provisions from the financial year 2001-02. The finance Act, 2001, was introduced to substitute section 92, along with section 92F and section 92A in the Income Tax act 1961. The purpose of the substitution was to offer a clear statutory framework that can give a fair and reasonable computation process with equitable profits and tax in India. The Central Board of Direct Taxes (CBDT) came out with the Transfer Pricing Rules (Rule 10A to Rule 10E) mentioning minute details in relation to Arm's length price, associated enterprise, and the documents requirements to indulge in international transactions.
Transfer pricing provisions are applicable to international and specific domestic transactions that take place between related/associate enterprises.
However, in this article, we will have a detailed discussion about international transactions only.
Business entities in India need to fulfill two conditions to apply transfer pricing provisions. To comply with the transfer pricing provisions, the first thing required is an international transaction. Secondly, the transaction must have to happen between two or more associated business enterprises where at least one party is a non-resident.
“International transaction” means a transaction between two or more associate enterprises, where either or both parties are non-resident.
Such transactions can be related to purchase, sales or lease of property, tangible or intangible assets, lending of money, provision of services or any other transaction. As said earlier, one of the parties involved in the transaction has to be a non-resident entering to one or more than one of the transactions mentioned below:
Managerial participation, ownership of one business entity by another is the two basic conditions of considering Associated Enterprises.
As per the definition mentioned in Section 92A(1) of the Income Tax Act, 1961, the participation of associated enterprises can be direct or indirect or through one or more than one intermediaries.
Section 92A(1) is further supplemented with 13 additional clauses that enlist different circumstances under which two business entities will be adjudged as Associated Enterprises.
As per section 92A, you must consider the following entities:
1. Where one party participates, directly or indirectly, in the management or control or capital of the other enterprise.
例如：A有限公司拥有全资子公司B有限公司。因此，A有限公司和B有限公司应被视为关联企业，双方之间的任何交易均须遵守转让定价规定；或
2. 双方在管理、控制或资本方面存在共同参与的情况。
例如：A有限公司和B有限公司均为C有限公司的子公司。由于两家公司均受共同控制，A有限公司和B有限公司应被视为关联企业；或
3. 一家企业直接或间接持有另一家企业不少于26%的表决权股份；或
4. 通过持有超过26%的表决权而处于共同控制下的企业；或
5. 一家企业向另一家企业提供的贷款金额达到该另一家企业资产总额账面价值的51%或以上；或
6. 一家企业为另一家企业提供不少于10%的借款担保；或
7. 一家企业的董事会或管理委员会成员中，超过半数的人员，或一名或多名执行董事或执行管理人员，由另一家企业任命；
此外，
8. 两家企业各自的董事会或管理委员会成员中，超过半数的人员，或一名或多名执行董事或管理人员，由同一人或同一组人任命；或
9. 一家企业所从事的商品或物品的制造、加工或业务，完全依赖于其他企业拥有的专有技术、专利、版权、商标、许可等；或
10. 一家企业90%或以上的原材料和消耗品是从其他企业或该其他企业指定的人员处采购，且供应价格及其他相关条件受该其他企业影响；或
11. 一家企业制造的商品或物品销售给其他企业或该其他企业指定的人员，且价格及其他相关条件受该其他企业影响；
此外，
12. 受个人及其亲属，或该个人与亲属共同控制的企业；或
13. 受印度教未分割家庭（HUF）或该家庭成员，或该成员与其亲属共同控制的企业；或
14. 若一方为合伙企业、人员协会或个人团体，而另一方在该合伙企业、人员协会或个人团体中持有不少于10%的权益；或
转让定价法规的适用范围非常广泛。根据规定，即使在以下情况下，您也必须将该交易视为国际交易。
如果一家居民商业实体向国外的非关联方提供商品或服务，且该非关联方与一家关联企业之间存在可能影响产品价格的单独协议。
两个非关联方之间的交易通常遵循公开市场价格。但根据独立交易原则，如果交易发生在两个关联方之间，其价格应与双方无关联关系时所确定的价格一致。
独立交易价格是指关联企业之间在遵循独立交易原则的情况下所确定的交易价格。
根据经济合作与发展组织（OECD）的定义，独立交易价格（ALP）是指在非受控情况下，两个非关联企业之间进行交易时所采用的价格。
根据交易类型或类别，将采用计算独立交易价格的最佳方法。根据第92C条的规定，独立交易价格在涉及国际交易时，需通过以下任一规则确定：
此外，我们已在另一篇文章中提供了关于ALP计算方法的详细信息。点击此处阅读。
根据转让定价法规，如果一个财政年度内与关联方进行的国际交易价值超过1000万卢比，则必须详细保存相关文件。但对于文件保存也有明确的豁免规定。关联
清单包括：
根据相关法案，所有进行国际交易或特定国内交易的印度纳税人都有法律义务报告合规情况。因此，必须由授权税务从业者或特许会计师按规定格式出具报告，提供与交易相关的详细信息。会计师需要明确以下几点：
此外，企业需针对每个财政年度通过3CEB表格提交报告。
转让定价法规对不合规行为设有严格的处罚条款。下表列出了违反各项规定所对应的处罚详情：
Associated Enterprises proceeding through an international transaction or cross border transactions have to ensure that all the transactions are maintained with Arm's Length Principle. Hence, if you fail to maintain proper documents, a heavy penalty will have to pay.
