Transfer Pricing Consultation helps businesses comply with tax regulations when transacting with related entities (subsidiaries, parent companies, or sister concerns) across different countries. It ensures that prices for goods, services, or intellectual property are set at arm’s length—meaning they match market rates, preventing profit shifting and tax evasion.
Key Aspects of Transfer Pricing Consultation
▶ Compliance with Tax Laws:
⇒ Ensures adherence to Income Tax Act (Section 92-92F in India) and OECD guidelines.
▶ Benchmarking Analysis:
⇒ Compares transactions with market standards.
▶ Risk Mitigation:
⇒ Prevents penalties from tax authorities due to non-compliance.
▶ Documentation & Reporting:
⇒ Maintains detailed records of intercompany transactions.
Transfer Pricing Reports (TP Reports)
A Transfer Pricing Report is a mandatory compliance document required by tax authorities to justify pricing in related-party transactions. It includes:
⇒ Nature of Transactions – Goods, services, royalties, etc.
⇒ Comparable Uncontrolled Price (CUP) Analysis – Market price comparison.
⇒ Methods Used for Pricing – TNMM, Resale Price, Cost Plus, etc.
⇒ Financial and Economic Analysis – Profit allocation among entities.
⇒ Compliance Certification – Report submission under tax laws.
This report is mandatory for companies with international or specified domestic related-party transactions to avoid tax adjustments and penalties.