Transfer Pricing

Taxation

Transfer Pricing

Transfer price is the price at which two divisions of the same company supply goods or services or labour to each other, assuming that both the divisions are separately managed profit centres.

Income tax law enforces arm's length transaction rule on transfer pricing transactions which means sale value of a transaction between related parties must be based on similar transaction done between unrelated parties. We, at Especia Associates LLP, ensure that all transactions related to transfer pricing must be based on arm length price and both the parties should comply with the transfer pricing rules. As such, our dedicated team keeps an eye on all such transactions and keeps updating our clients about the ambit of transfer pricing.

Choosing the appropriate method:

It is essential to choose an appropriate method for determining the arm length price for the transactions under review. There are 5 main methods of transfer pricing and all of them have their own characteristics and pros & cons. Before assisting on choosing an appropriate method, our team conducts a financial analysis to identify the functions of the two entities involved in the transaction, capacity of the entities to bear risk and the involvement of assets.

Our expert team considers the following aspects to provide better understanding on an appropriate method:

  • Nature of the transaction,

  • Class of the associated enterprises,

  • Availability and reliability of data necessary for applying a particular method,

  • Comparable grounds between the transfer pricing transaction and the uncontrolled transaction,

  • Nature and extent of assumptions required in the application of the method.

Benchmarking analysis

Benchmarking analysis helps you to move forward in a clear direction and understand the transfer pricing for intercompany transactions to attain maximum profitability.
Our team of experts conducts the benchmarking analysis on following basis:

  • Reviewing and conducting in-depth study of related party pricing information,

  • Selecting the comprehensive list of external companies whose data can be compared to the data of the company in consideration,

  • Adjusting the data to give effect of accounting and capital disparities,

  • Comparing the adjusted data with the company's business operations

Outcome of a benchmarking analysis will be a precise transfer pricing price, and a range of profit level. We also ensure that the tax risk is mitigated in case of transfer pricing audit.

Issuing transfer Pricing Certificate

Every business entering into an international transaction or specified domestic transaction has to obtain a report from Chartered Accountant. The report has to be submitted to income tax department on or before 30th November of each financial year. Our team of expert professionals have extensive experience and in-depth knowledge of transfer pricing provisions. We analyse the documents and information properly along with certifying the correctness of the details of each transaction.

Transfer pricing documentation and litigation

Certain documents have to be prepared for the purpose of transfer pricing documents. Our team of expert professionals assist in preparing those documents and complying with the requirements of income tax act. In addition, our experienced Chartered Accountants represent the case before the income tax authorities. We provide litigation assistance related to assessments and appeals.