TP Study
Transfer pricing Study is a study which can be documented considering the international transactions between the two or more Associated Enterprises.
Introduction
Transfer pricing Study is a study which can be documented considering the international transactions between the two or more Associated Enterprises.
- The international transactions may be the following
- Purchase of raw-material;
- Sale of finished goods;
- Software Development services;
- I T Enabled services;
- Support services;
- Technical Service fees;
- Royalty fee ;
- Management fees;
- Corporate Guarantee fees ;
- Loan received or paid;
- Purchase of fixed assets;
- Reimbursement of expenses paid / received ;
- Sale or purchase of machinery etc…
To substantiate the above international transactions, the following are required to be studied while keeping in view of the international transfer pricing:
- Brief profile and nature of business of the Indian company ;
- Brief Profile and nature of business of the foreign entity or associated enterprises;
- Details of international transactions;
- F A R Analysis ( i.e. Functions, Assets and Risks Analysis );
- Industry Analysis of the tested party;
- Economic Analysis (i.e. Selection of Most Appropriate Method)
- Application of Most appropriate method
- Analysis under CUP or TNMM or CPM or RPM or PSM etc.
- (if it is under TNMM, data analysis and research is to be done from the public data bases)
- Conclusion substantiating the pricing of the tested party for each international transaction.
If the above is in order, then proper study on transfer pricing is completed on each international transaction under any of the specified methods and we can see that the pricing should be at Arm’s Length Standard.