Transfer pricing documentation

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 

1. Master file
2. Local file
3. 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 

1. Consolidated group revenue as per the consolidated financial statements of group exceeds  rupees 500 crores
2. 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.