Transfer Pricing Model
Each country is following its own model of Transfer Pricing analysis, but most of the countries are following OECD model of convention on Transfer Pricing. Some are following UN Model of TP also.
India is following its own model of Transfer Pricing under the Income-tax Act and IT Rules and India is an observer of OECD Model of convention on Transfer Pricing. India is a non-member in OECD ( Organisation for Economic Cooperation and Development).
India is successful in implementing the Transfer Pricing laws in the country. It has achieved a target of Rs.10,000 Cr adjustment for the financial year 2005-06. It has grown fastly and law evolved fastly and rapidly in India. There are so many new criterion have come up in selecting the comparables. There are so many new concepts have come up in treating the “ Reimbursements , Interest income, deemed international transactions , sale of shares, loans received/ paid , corporate guarantees etc., at Arm’s Length Standard.
India is rapidly growing using its own model of TP rules and also observing the OECD TP Guidelines. In fact, OECD is also agreed that India is fast developing country on transfer pricing and OECD itself learning the rules/concepts framed by Indian Revenue Authorities. Previously, OECD thought that TNMM is the last resort method to apply. But after looking the India’s position, TNMM can be applied mostly not as a last resort, but in the beginning itself out of all the five methods.
Indian International Transfer Pricing approach is most critical and the business is good in India and the margins are good in all types of industries.