Billing Parent compnay for Software Services

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harsha (Querist)
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09 October 2009 Hi All,

My parent compnay is into pharam & biotech research. Our India office is outsourcing centre of our group for providing software development support.

My Parent has instructed me to raise the bill for the expenses incurred i.ePayroll, Admin & overhead expenses.

Now my question is; Can we bill the parent for Admin & overhead expenses seperately?

We can include the admin & overhead expenses and payroll expense and calculate hourly rate (XX $ per man hour). Most of the IT services companies are following this method.

Please let me know if there is any provision for billing other than the above method.

regards,
harish

CA SANJAY MUKHERJEE

CA SANJAY MUKHERJEE (Expert)
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09 October 2009 Hi Harsha,

Your intention is to apply provisions of transfer pricing and as per that you need to recharge not only the cost but something more may be on Cost+ basis.

So far I know T P does not specify the things u have to show in your invoice so u can decide how to break up the charges in the bill but most important is to prepare and keep the workings based on which u r invoicing.

Hope other experts will join this discussion and contribute with their valuable opinion.

harsha

harsha (Querist)
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09 October 2009 Dear Mr. Sanjay,

Thank you very much for your feedback.

We are on the process of TP and we are planning to bill Cost + 15%. My concern is how to bill the expenses which are incurred for Rent, professional charges & other overhead expenses. Can we show these overhead expenses in the Invoice?

Since we are billing only for the Services, I want to include all the expneses (Cost) + 15% (margin)and raise the bill. My thoughts of workings are;
No. of employees X 8 hrs. per day X 20 days per month. This will give total number of man hours, Cost+15% divided by total man hours will give $ rate per hr.

Do you kown any alternative method used for billing? Please provide your thoughts on this regard

Thanks,

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