What is Transfer
Pricing

Transfer pricing refers to the pricing of goods, services, or intellectual property exchanged between related entities within a multinational company. It ensures that transactions between subsidiaries in different countries are conducted at arm’s length — as if they were between unrelated parties. Proper transfer pricing is crucial for tax compliance, as it affects how profits are allocated and taxed across jurisdictions. Governments closely regulate it to prevent tax avoidance and ensure fair revenue distribution.

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Our Transfer pricing service
offering involves the following:

TP Planning

Cross border tax structuring and financial planning

Assistance in obtaining advance pricing agreements (APAs)

Assistance in understanding and implementation of Safe Harbor Rules

TP Litigation and representation before TP authorities

FAR Analysis & TP Documentation

Benchmarking services

Drafting of inter-company agreements

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Frequently Asked Questions

What is transfer pricing?

Transfer pricing refers to the pricing of goods, services, or intellectual property transferred between related entities within a multinational company. It involves determining the appropriate prices for these transactions to ensure they are conducted on an arm's length basis, as if they were between unrelated parties. This practice is often used by multinational companies to allocate profits and costs across different countries in which they operate.

Is there any formula for calculating transfer pricing?

Yes, there are different formulas for calculating transfer pricing, depending on the method chosen to determine the appropriate price for a transaction between related entities. The Comparable Uncontrolled Price (CUP) technique is frequently used. Another common method is the Cost-Plus method, which adds a markup to the cost of goods or services. The Resale Price method is also used to determine the price by subtracting an appropriate margin from the resale price.

What are the common transfer pricing methods?

Common transfer pricing methods include the Comparable Uncontrolled Price (CUP) method, Resale Price Method (RPM), Cost Plus Method (CPM), and Transactional Net Margin Method (TNMM). The choice of method depends on the nature of the transaction and the availability of comparable data.

What is transfer pricing documentation?

Transfer pricing documentation refers to the documentation prepared by companies to support their transfer pricing policies and demonstrate compliance with tax regulations. It typically includes a transfer pricing study that analyses the company's related-party transactions, justifies the chosen methods, and provides supporting data and analysis.

When does Transfer pricing apply to a company?

Transfer pricing applies when related parties enter into cross-border transactions involving the transfer of goods, services, or intangible property. This includes transactions between a parent company and its subsidiaries, between two subsidiaries, or between two entities with substantial ownership or management control.

Is Transfer pricing mandatory for all companies?

Transfer pricing is a mandatory requirement for all companies that engage in cross-border transactions with their associated or related enterprises.

How can I determine if my company needs transfer pricing services?

If your company engages in cross-border transactions with related parties, operates in multiple tax jurisdictions, or experiences significant intercompany flows, it is advisable to consider transfer pricing services. A comprehensive analysis of your transfer pricing risks and obligations can help determine the specific services your company may require.

Why is transfer pricing important?

Transfer pricing is crucial for multinational companies as it helps ensure fair and accurate allocation of profits and expenses among their entities operating in different tax jurisdictions. It also helps maintain compliance with local tax regulations and avoids potential disputes with tax authorities.

What are the potential risks of transfer pricing?

The risks of transfer pricing include tax authority audits, adjustments to transfer prices, penalties, interest charges, and potential double taxation. Inadequate transfer pricing documentation or non-compliance with local regulations can increase the risk of disputes with tax authorities.

What is the normal fee for Transfer pricing certificate?

The fee for obtaining a transfer pricing certificate varies depending on the institution or organization that offers the certificate program. Typically, the cost ranges from Rs 1 lakh to Rs 10 lakhs.

Can Dealplexus help me in connecting with the right experts in transfer pricing?

Businesses can turn to Dealplexus for guidance in navigating the intricate world of transfer pricing. Experts at Dealplexus offer a wealth of knowledge and experience in this specialized area, which can be difficult to navigate without guidance. Please write to support@dealplexus.com to know more.

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