Foreign Companies Now Allowed to Appeal Transfer Pricing Taxes

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Feb. 1 – Multinational companies asked to pay additional transfer pricing taxes for overseas transactions will be given the choice to appeal their case to the conventional forum of Commissioner or the Dispute Resolution Panel (DRP).

Previously, a tax order coming from of a transfer pricing officer (TPO) was considered the final decision but now a taxpayer can opt to appeal against TPO’s order before the DRP. It will be the DRP decision that will be considered binding and final.

The DRP will make it easier for foreign companies to resolve tax disputes. So far, more than 1,600 companies with cross-border transactions with Indian companies have been assessed and 800 of these companies ordered to pay an additional taxes.

India’s transfer pricing regulations were introduced in 2001 and enforced in 2003. Companies are advised to adopt quality transfer pricing documentation to avoid tax disputes.  Care must be taken to comprehensively record international transactions with overseas affiliates including company and industry profiles and proof that transactions were done at arm’s length prices.

For more inquiries on the implications of India’s transfer pricing laws email