Budget2023 Expectations – Transfer Pricing
On 01 February 2023, the Finance Minister will present the budget for 2023. Transfer Pricing expectations / recommendations from this budget is presented in the alert. The alert includes:
- Advance Pricing Agreement (APA) – Allocation of more resources for APA program to reduce the pending inventory of APA applications, formulaic approach to fasten the conclusion of relatively less complex transactions and inclusion of standard information requested during the APA in the application itself.
- Pillar One/ Pillar Two – Implementation of Pillar Two in India domestic tax legislation and interplay of Pillar One/ Two with transfer pricing depending on the how the model rules are implemented.
- Safe Harbour Rules – Introduction of royalty as covered transaction, revision of base for intra-group loans from LIBOR to Alternate reference rates and updating the ratio of employee cost to total cost for determining the arm’s length mark-up for knowledge process outsourcing (KPO) services.
- Ease of transfer pricing compliance for Startups
- Adoption of interquartile range as arm’s length range.