Transfer Pricing
In short
Indian transfer pricing rules require transactions between associated enterprises, such as an Indian subsidiary and its foreign parent, to be priced at arm's length. Businesses with such transactions must maintain documentation and obtain an accountant's report certifying the transactions, filed with the income tax return.
Overview
Transfer pricing applies to international transactions between associated enterprises and to certain specified domestic transactions. Typical examples are purchases and sales, services, royalties, loans, guarantees and cost recharges within a group.
Inadequate documentation or pricing that cannot be supported can lead to adjustments, interest and penalties. We help you set defensible pricing and maintain the documentation the law requires.
Key requirements
- International transactions with associated enterprises, or specified domestic transactions above the prescribed threshold
- Contemporaneous documentation for transactions above the prescribed limits
Documents required
- Group structure and inter-company agreements
- Details and values of related-party transactions
- Financial statements
- Functional information: functions performed, assets used and risks assumed
We share an exact checklist for your case before you start, since requirements vary with the structure and the people involved.
Process
Scoping
We identify associated enterprises and covered transactions.
Analysis
A functional analysis and benchmarking study are prepared.
Documentation
The transfer pricing study report is prepared.
Certification
The accountant's report is issued and filed with the return.
What KNAP Advisory handles
- Transfer pricing applicability review
- Functional analysis and benchmarking
- Transfer pricing documentation
- Accountant's report
- Support in transfer pricing assessments
Frequently asked questions
Does transfer pricing apply to a small Indian subsidiary?
If it has international transactions with associated enterprises, the accountant's report is required regardless of size. Detailed documentation applies above the prescribed transaction limit.