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The transaction between the associated or the related enterprise may happen under different circumstances from those of taking place between the autonomous enterprises. #TransferPricing can be defined as the price payable on goods or services transfer between one economy unit to another economy unit (assuming both units are in different countries but belongs to same multinational company & firm). The term transfer pricing is used for the intra group transaction, cross border transaction, intangible goods, or services that include financial services. The object of Transfer Pricing Provision (TPP) If we see in terms of India, there was a need for a detailed legislative framework which can help to move forward in a more fair, reasonable and equitable allocation of tax and profit in India. Section 92A-92F were implemented with effect from 2002 with rules from 10A to 10E. These provisions cover the meaning of associated enterprises and international transaction and simultaneously providing the methods of computing, documentation requirement and the arms length price. These provisions also established an authority named as the TP Officer who is specialised in the role of establishing arms length price. International transactions that are governed by the rules of transfer pricing. These include: • Trade of the finished goods • Buying of raw material • Buying of fixed assets • Purchase and sale of machinery • Purchase and sale of Intangibles • Compensation of the expense received/paid • Services which are IT enabled • Support services • Development of software services • Service fees (Technical) • Management Fees • Loan paid or received • Royalty fees • Corporate guarantee fees What is the Importance of the transfer pricing provision? For the purpose of effectively reporting and accounting, multinational companies have some level of discretion regarding how to distribute the expenses and profits to all the subsidiaries located in different nations. Many times a subsidiary of the main organisation might be segregated into segments or can be accounted as a standalone business. In these cases, transfer pricing can help in distributing the profits and the losses such as subsidiaries in a correct manner. The essentials of the transfer pricing: 1. Associated enterprise under #TransferPricingProvision means when Two enterprises are said to be associated enterprises when one of the enterprises participates in the control or management or capital of the other enterprise either directly or indirectly or through an intermediary. 2. International transaction under Transfer pricing provision means a transaction between two or more associated entities, one or both of which are non-residents, in the nature of an acquisition, selling, or leasing of tangible or intangible property, or the rendering of services, or lending or borrowing money, or any other transaction having a direct effect on the profits, revenue, losses, or assets of such enterprises, is defined as an international transaction. 3. Arm’s Length method under Transfer pricing provision With the conformity of the OECD guidelines, there are 6 methods for the calculation of arm’s length price which can be either indirect or direct. The direct methods comprise of comparable uncontrolled price method, the resale price method and the cost plus method. Know more visit: https://enterslice.com/transfer-pricing-in-india Want to know more about #Enterslice Share, Support, Subscribe!!! to our YouTube channel: http://bit.do/fqM2B Facebook: https://www.facebook.com/enterslice Twitter: https://www.twitter.com/enterslice LinkedIn: https://www.linkedin.com/company/enterslice/ Instagram: http://instagram.com/enterslice_official