D.3.10.4. Adjustments made by transfer pricing officials (TPPs) have been the subject of judicial review in India and, although the case still needs to be definitively decided by the Supreme Court, the high courts and courts` decisions have given rise to the following principles: intercompany agreements can cover different controlled transactions. Below, we provide an overview of transfer pricing agreements between associated companies that need to be formalised in intercompany agreements in order to make them legally binding, to comply with transfer pricing legislation and to ensure an appropriate line of defence against the challenges posed by tax authorities. If you don`t, your business is seriously and unnecessarily threatened. Apple Austria transfers its shares and customer list to Apple Germany. Financial option agreements are considered indirect tax effects on transfer pricing adjustments, independent of the ITA and subject to different laws. An intercompany agreement (also known as an “intragroup agreement” or “transfer pricing agreement”) is a (signed) contract between two or more related companies. This contract governs the terms (CG) of controlled transactions, such as the provision of goods or services from a company linked to another associated company. D.3.1.3. As a member of the G20, India participated on an equal footing with the OECD and other non-OECD countries in the Base Erosion and Profit Shifting (BEPS) project and was part of the consensus developed under the various components of the BEPS project. The final reports of the 15 action points of the BEPS project were approved at the highest political level by all G20 countries, including India. As a result, India is required to implement all of the recommendations contained in the BEPS reports, including transfer pricing recommendations.
D.3.12.3. Credit guarantee fees are another problem for financial transactions. With the increase in foreign investment, Indian transfer pricing management has encountered cases of corporate guarantees that have been extended by Indian parents to their foreign-linked companies, where the Indian parent company, as guarantor, agrees to pay the full amount owed for a credit instrument in the event of default by the borrower. The guarantee helps an associated unit of the Indian parent company obtain a loan from the bank. India`s transfer pricing generally determines the APLs of these guarantees under the comparable uncontrolled pricing method. In most cases, interest rate prices and bank guarantee rates are used as benchmark rates for LPAs. The Indian tax authority also uses the interest rate prevailing in Rube bond markets in India for bonds rated differently. The difference in rating between the parent company in India and the foreign subsidiary is taken into account and the interest rate specific to an Indian bond rating is also taken into account in determining the length price of these guarantees. Case selection based on the risks for transfer pricing review, instead of selecting all cases above a certain monetary limit of the value of international transactions for review; D.3.8.7. Significant transfer pricing problems have also occurred in the case of co-branding of a new foreign brand owned by the parent company MNE (an unknown brand in a new market such as India) with a popular Indian brand.