Transfer Pricing Seminar - SICASA
CA Abhishek Jain
CA Kiran Jain
9 November 2014
Transfer Pricing
Basic Concepts
November 2014
CA Abhishek Jain & CA Kiran Jain
Transfer Pricing – Basics / Form 3CEB / Assessments
Simple Intra-group transactions
Product transfer
US Co
India Co
Transfer price = 80
Sales
Total Costs
Operating Profit
80
(60)
20
Sales
Cost of Goods
Gross Profit
Operating Expenses
Operating Loss
100
(80)
20
(25)
-5
Consolidated Operating Profit = 15
November 2014
CA Abhishek Jain & CA Kiran Jain
Transfer Pricing – Basics / Form 3CEB / Assessments
Effect of lower transfer price
Product transfer
US Co
India Co
Transfer price = 70
Sales
Total Costs
Sales
70
Cost of Goods
Gross Profit
Operating expenses
Operating Profit
(60)
Operating Profit 10
100
(70)
30
(25)
5
Consolidated Operating Profit = 15
Due to the special relationship between related parties,
the transfer price may be different than the price that
would have been agreed between unrelated parties
November 2014
CA Abhishek Jain & CA Kiran Jain
Transfer Pricing – Basics / Form 3CEB / Assessments
Rational for Introducing Transfer Pricing
Regulations
Finance Minister’s speech
“The presence of multinational enterprises in India and their ability to allocate
profits in different jurisdictions by controlling prices in intra-group
transactions has made the issue of transfer pricing a matter of serious concern. I had
set up an Expert Group in November 1999 to examine the detailed structure for transfer
pricing legislation. Necessary legislative changes are being made in the Finance Bill
based on these recommendations.”
- Mr Yashwant Sinha
Finance Minister, Government of India
February 28, 2001
November 2014
CA Abhishek Jain & CA Kiran Jain
Transfer Pricing – Basics / Form 3CEB / Assessments
An Introduction
Organisation for
Economic Cooperation
and Development...