What is transfer pricing?
Price charged between two or more entities of a multinational group.
The international transactions between two or more associated enterprises should be at 'Arm length price'.
Arm length price is the price which would have been charged ,had the transaction taken place between two unrelated parties i.e, independent entities.
Documentation and compliances
The primary objective of transfer pricing documentation is to review the 'fair price' nature of the transactions taking place between the different entities of multinational group.
Who are required to keep and maintain information and documents:-
- The entity who enters into international transaction
- Constituent entity of multinational group will maintain prescribed information and document in respect of the group, irrespective of whether or not such entity has undertaken any international transaction.
3 tier structure of documentation
- Master file
- Local file
- Cbc report
1.Master file
Constituent entity has to keep and maintain master file irrespective of whether any international transaction is taken by such Constituent entity.
FORM 3CEAA( MASTER FILE): PART A has to be filed irrespective of whether the below mentioned threshold is satisfied or not.
Threshold
- Consolidated group revenue as per the consolidated financial statements of group exceeds rupees 500 crores
- And the aggregate value of international transactions
- During the accounting year as per books of accounts exceeds 50 crore rupees
Or
- In respect of purchase , sale, transfer,, lease or use of intangible property exceeds 10 crore rupees as per books of accounts.
FORM 3CEAA is to be furnished on or before due date of furnishing return of income u/s 139 (1) of income tax act, 1961.
2.Local file ( discussed in detail in my next article)
3. CBC REPORT
Country by country reporting is required to be filed by parent entity of an international group to the prescribed authority in the country of its residence.
The above reporting provisions shall apply in respect of an international group for an accounting year , if the total group revenue as per the consolidated financial statements of preceeding accounting year exceeds rupees 6400 crore or the equivalent foreign currency at TTBR on the last day of preceeding accounting year.
FORM 3CEAD has to be furnished within 12 months from the end of the said report accounting year.
FORM 3CEAC is to be furnished by the Constituent entity resident in india at least 2 months prior to due date of furnishing CBC REPORT:-
- Whether it is the alternate reporting entity of an international group
- The details of the parent entity or the alternate reporting entity, if any of the international group and the country of which the said entities are resident.
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