Transfer pricing is the price charged for the transfer of goods or services between related parties, such as a parent firm and its subsidiary, or between subsidiaries of the same parent company. The goal of transfer pricing is to ensure that transactions between connected parties are handled at arm's length, i.e., at the same price that would be charged for a transaction between unrelated parties.
Transfer pricing is crucial since it can significantly affect a company's tax liability. If a enterprise uses excessively high transfer prices, it might artificially reduce its taxable income in one jurisdiction while increasing it in another. If a enterprise sets transfer prices that are excessively low, it might raise its taxable income in one jurisdiction while decreasing it in another. This can lead to tax authorities in various jurisdictions disputing over the transfer prices, which could result in double taxation or other penalties.
Transfer pricing services relate to the consulting and advising services provided by specialists to businesses in order to assist them in ensuring compliance with transfer pricing legislation, optimising their transfer pricing policies, and mitigating the risk of tax authority disputes. These services may include transfer pricing paperwork, benchmarking study, transfer pricing strategy, dispute resolution, and audit defence.
Yes, transfer pricing documentation is required for certain types of transactions in India. The Indian transfer pricing requirements compel taxpayers to retain evidence demonstrating arm's-length transfer prices. Noncompliance with transfer pricing requirements may result in penalties and interest fees.
A variety of specialists, including accounting firms, legal firms, and specialised transfer pricing consulting firms, offer transfer pricing services in India. These experts may specialise in tax, accounting, economics, or law, and they may be located in India or in other nations. At KNAP Advisory, we have team of Chartered Accountants who specialised in the transfer pricing and have already worked with MNCs and other entities.
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