Transfer pricing query for start up company

Tax planning 972 views 3 replies

Aman Didwania

Operations Manager

28 Points Joined June 2011

Hi,

We are a start up software development company in India and started our business in July 2010. We are developing products which in the near future will be sold to clients in European and other Western Countries but we don't have any immediate client. All the expenses related to Indian operations is currently financed by US company and revenue is nil. We are expecting revenues in the next one year when our product will be ready.

I will like to know if we will need a Tranfer Pricing audit or we need to submit Form 3CEB since no revenue is generated till now. Only capital flow has been done from US but there is no other international transaction.

Please advise asap.

Thanks,

Aman Didwania

Replies (3)

valji

Accounts manager-MBA

2150 Points Joined July 2008

whether your transction are involved as loan received from us company or as a Advance received from us company

you have to follow RBI guidelines any amt received FROM Foreign company

for transfer pricing meaning are transfer of profit , you are not having any sales to group company so it is not required to prepare audit report

CA. Anuj Gupta

Practices in NRI Int.Tax FEMA TP FD

7024 Points Joined May 2007

Transfer Pricing is applicable only when there are international transactions between assocaited enterprises.

For the definition of terms "international transaction" and "associated enterprise" kindly see the definitions in sec 92A and sec 92B.

In your case I personally feel that there shall be lot of transactions wherein the reporting requirements shall be there.

Anuj

Dipjyoti Majumdar

CA in service & CS. dipmaj@

3469 Points Joined June 2011

Though there are no sale or purchase / rendition of service in this FY, if you are paying interest to the overseas related party for financing by them there is international transaction with AE.

Check if the RP is an AE or not. Where there is ECB or FCD given by RP, you need to calculate if the loan is les than 51% of book value of assets. If through equity, check 26% voting power is there or not by RP.

Regards,