As the Indian transfer pricing compliance season is around the corner, I am sure, many multinational companies along with the Chartered Accounts would be occupied in justifying and certifying the transfer prices for the company undertaken in FY 2017-18. Here are the top 5 tips for an effective transfer pricing season for the MNC as well as the accountants
- Transfer Pricing Study first: Always conclude the TP study first and then the certification in Form 3CEB. This is important to ensure that the method selected in the form 3CEB is well justified in the study and thought through. Helps in reducing litigation over the change of method at the time of assessments and also prevents post facto and ensures contemporaneous documentation. Also, note that Form 3CEB is a true and correct certification by an Accountant. In transfer, pricing it is easier to represent the present than dig through the past in future.
- Tune it to the business and supply chain: The transfer pricing analysis is an analysis of the business and not an independent analysis. Therefore it is important that the analysis talks the business language and follows the industry standard. For example, if a business looks at a trading and manufactured product as one segment, perform a combined product analysis rather than a separate analysis as the profitability of the segment would be based on the combined system approach. Accordingly, justify in the TP Study report.
- Pay attention to Master-File compliance: Since FY 2016-17, India has adopted BEPS action plan 13, which highlights Master File documentation. Form 3CEAA in addition to Form 3CEA is an important element to be addressed by the company, the due date of which coincides with the transfer pricing documentation due date i.e. 30 November.
- Compulsory Double taxation: Transfer pricing is a tax anti-avoidance law and therefore any transfer pricing adjustment which is not made correspondingly in the books of accounts cannot be given a compensating effect in the other tax jurisdiction. Thereby leading to a compulsory double taxation on the same income. Important to also note the impact of interests and penalty of the transfer pricing law. In India, the penalties are significant for non-compliance.
- Ask the expert: Transfer Pricing like Valuation practice is a specialised area of expertise. Wherever you need any clarification whether as an industry professional or a professional accountant, it is best to seek clarifications from an expert and proceed.
In case you need any further clarifications, you may like to reach out on the coordinates provided below.
CA. Akshay Kenkre