International taxation

International Taxation – FAR Analysis

Hello Readers, Hope you have read the previous parts. Click here to see the previous parts. FAR Analysis Functions, Assets and Risk (‘FAR’) analysis is an analysis of the functions performed, taking into account assets used and risks assumed by associated enterprises (AEs) in controlled transactions. A method of finding and organizing facts about a business in terms of the functions performed, assets used (including intangible property) and risks assumed by such business to: Identify how they are divided among the AEs; and Ø [...]

International Taxation – Profit Level Indicators

Hello Readers, Hope you have read the previous parts. Click here to see the previous parts. Profit Level Indicators  A profit level indicator (PLI) is selected to test the profitability of tested party. PLIs are ratios that measure relationships between profits and costs incurred or resources employed. PLI should always have an untainted* base (denominator) like adopting cost as base for export transactions and revenue as base for import transactions. *A tainted income or expense would mean one that is received from an AE paid [...]

International Taxation – Computation of ALP

Hello Readers, Hope you have read the previous parts. Click here to see the previous parts. Let’s proceed further…. Computation of ALP: I had already discussed CUP method of computation of ALP, so now let us discuss other parts: Method 2: Resale Price Method The resale price method (RPM) is a method which compares the gross margins (i.e. gross profit over sales) earned in transactions between related and unrelated parties for the determination of the ALP. The RPM requires high level of functional comparability and [...]

International Taxation – Int. Transactions, Profit Shifting, ALP Computation

Hello readers, hope you have read the previous parts in which we had covered the basics of international taxation laws and the concept of associated & deemed associated enterprises. Let’s proceed further….. International Transaction An international transaction means: a transaction between two or more associated enterprises, either or both of whom are nonresidents; and transaction in the nature of: sale/ purchase/ lease of tangible property; or sale/ purchase/ lease of intangible property; or provision of services; or lending/borrowing money; or any other [...]

International Taxation – Associated Enterprises

Hello Readers, Yesterday we have discussed about the basics of international taxation and covered basic aspects regarding the Arm Length’s Price principles and the reason behind the introduction of transfer pricing provisions in the Income Tax Act, 1961. Hope you have gone through it. Let’s proceed further and today we will cover other aspects of transfer pricing. **TP means Transfer Pricing **ALP means Arm Length Price Section 92: COMPUTATION OF INCOME FROM TRANSACTION WITH NON-RESIDENT Section 92 provides that any income arising from an “international transaction” [...]

International Taxation – Basics

INTERNATIONAL TAXATION Why should a Chartered Accountant be aware of International Taxation Laws? In context of ICAI’s vision; The profession of Chartered Accountancy is touching international heights in the area of Auditing and Taxation. Our Institute is working relentlessly for making Indian Chartered Accountants, A Global Professional. Now what makes a Chartered Accountant different from other professionals is their adaptability towards new and tough areas. As you know very well, Taxation is the most dynamic and wide area as compared to [...]

Base Erosion & Profit Shifting – A Global Challenge

Base Erosion & Profit Shifting – A Global Challenge Meaning: “Recently more and more enterprises organised abroad by American firms have arranged their corporate structures aided by artificial arrangements between parent and subsidiary regarding intercompany pricing, the transfer of patent licensing rights, the shifting of management fees, and similar practices in order to reduce sharply or eliminate completely their tax liabilities both at home and abroad.” So, Base erosion and profit shifting (BEPS) refers to tax avoidance strategies that exploit gaps and [...]

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