News shortcuts: From the Courts | News Headlines | VAT (Value Added Tax) | Placements & Empanelment | Various Acts & Rules | Latest Circulars | New Forms | Forex | Auditing | Direct Tax | Customs and Excise | ICAI | Corporate Law | Markets | Students | General | Mergers and Acquisitions | Continuing Prof. Edu. | Budget Extravaganza | Transfer Pricing | GST - Goods and Services Tax
« Transfer Pricing »
 National High Speed Rail Corporation Limited, New Delhi, Delhi
 Deals of the day-Mergers and acquisitions September 3, 2019
 Transfer pricing documentation due by year-end
 Transfer pricing amendments – a step towards certainty
 key international tax and transfer pricing developments
 Transfer pricing methodology of MNCs under customs department lens
 MNCs now won't have to file CbC report in Indiaa
 Citing Supreme Court’s Vodafone order, Bombay HC rejects transfer pricing adjustment
 General Insurance Corporation Of India, Mumbai, Maharashtra
 Air India Limited, Multi Location, Multi State
  Edcil India Limited, New Delhi

Indian secondary adjustments for transfer pricing: what you need to know about the new rules
June, 24th 2017

India’s Central Board of Direct Taxes on 15 June published new rules providing for transfer pricing secondary adjustments. These new rules attribute income to the excess money in the hands of an associated enterprise following a primary transfer pricing adjustment and also require an actual allocation of funds consistent with that adjustment.

The new Indian secondary adjustments rule shall apply to primary adjustments exceeding INR 10 million (USD 150,000) made in respect of assessment year 2017-18 onward.

The rule prescribes the time limit for repatriation of excess money and the rate of interest to be applied for computing the income in case of failure to repatriate the excess money within the prescribed time limit.

Separate rates of interest have been provided for international transactions denominated in Indian currency and in foreign currency. The rates of interest are applicable on an annual basis.

90-day time limit

Under the rules, a time limit of 90 days for repatriation of excess money shall begin only when the primary adjustments attain finality.

Where the taxpayer has made primary adjustment, suo-moto, in the return of income, the period of 90 days shall begin from the date of filing of return.

Where a transfer pricing order is appealed by the taxpayer, the time limit for repatriation shall commence only after the appeal is finalized by the appellate authority and the appeal order has been accepted by the taxpayer.

In case the primary adjustment is made as a consequence of an advance pricing agreement entered into by the taxpayer or as a result of application of safe harbor provisions, the period of 90 days shall begin from the date of filing of return.

Similarly the time limit of 90 days shall apply to the primary adjustment accepted by the taxpayer as a consequence to the mutual agreement process. The period of 90 days shall be reckoned from the due date of filing of return of income.

Interest computation

The computation of interest shall be dependent upon the currency in which the international transaction has taken place. In case of Indian currency, it shall be the one year marginal cost of fund lending rate of State Bank of India as on 1 April of the relevant previous year plus 325 basis points.

In case of foreign currency, the interest rate shall be six month London Interbank Offered Rate (LIBOR) as on 30 September of the relevant previous year plus 300 basis points.

Indian secondary adjustments – some thoughts

It appears that new guidance’s 90-day period to conclude the repatriation is quite fair. However, there is no clarity regarding what would happen if a taxpayer is not able to transfer the money. Will this lead to charging of interest on perpetual basis?

Also, a reverse scenario is to yet to be imagined. When an Indian multinational entity suffers secondary adjustment in a country, will the Indian entity be allowed to remit the money by the transfer pricing officers.

Whether the dividend route would have been a better proposition for Indian secondary adjustments is to be tested in coming times.

Home | About Us | Terms and Conditions | Contact Us
Copyright 2019 CAinINDIA All Right Reserved.
Designed and Developed by Binarysoft Technologies Pvt. Ltd.
Application Management Solutions Application Management System Application Management Software System Application Management Development Application Management Software Development

Transfer Pricing | International Taxation | Business Consulting | Corporate Compliance and Consulting | Assurance and Risk Advisory | Indirect Taxes | Direct Taxes | Transaction Advisory | Regular Compliance and Reporting | Tax Assessments | International Taxation Advisory | Capital Structuring | Withholding tax advisory | Expatriate Tax Reporting | Litigation | Badges | Club Badges | Seals | Military Insignias | Emblems | Family Crest | Software Development India | Software Development Company | SEO Company | Web Application Development | MLM Software | MLM Solutions