INSIGHTS

Qatar Pillar Two Update

As a part of OECD BEPS Pillar 2 developments, Qatar officially issued Council of Ministers Resolution No. 2 of 2026 on February 12, 2026, providing the detailed implementing rules for the OECD’s Pillar Two global minimum tax. This resolution supplements Law No. 22 of 2024 and confirms that the new tax framework is effective for fiscal years starting on or after January 1, 2025.

While the rules are largely aligned with OECD Pillar 2 framework, it is interesting to understand the implementation of such rules in Qatar. It is time for the taxpayers to focus on applicability, preparation and compliance of OECD Pillar two requirements wherever applicable. In view of the above, our alert provides a high-level overview of the applicability, computation and payment, compliance requirements and deadlines and the tax administration.

Open Attachment…

Qatar Pillar Two Framework

Summary

To align with international tax standards under the OECD/G20 BEPS initiative, Qatar’s General Tax Authority enacted Law No. 22 of 2024, amending the Income Tax Law (Law No. 24 of 2018) to implement the OECD/G20 GLoBE Model Rules (G20 Pillar Two).

Published on 27 March 2025, the law applies to financial years beginning on or after 1 January 2025 and introduces a 15% global minimum effective tax rate (ETR) for large MNE groups.

On 12 February 2026, the Qatar’s General Tax Authority (GTA) commenced administrative enforcement of the amended Income Tax Law to apply global and domestic minimum tax rules under OECD/G20 Pillar Two.¹

Applicability

The OECD/G20 Inclusive Framework combats profit shifting by Multinational Entities (‘MNEs’) through BEPS Action Plans. Building on this, Pillar Two establishes a 15% minimum effective tax rate per jurisdiction. On 5 January 2026, Qatar was added to the OECD’s Central Record, which recognized Qatar as a jurisdiction, introducing two key provisions to enforce this global minimum tax and Safe Harbour framework.

Global Minimum Tax – Qualified Income Inclusion Rule (QIIR)
Domestic Minimum Tax – Qualified Domestic Minimum Top-Up Tax (QDMTT)

The QDMTT rules mechanism ensure that any top-up tax required to reach the 15% jurisdictional ETR on Qatar profits is collected domestically, thereby preventing other jurisdictions from levying top-up taxes on these profits under their own IIR rules.

Under the legislation an MNE group is considered in-scope if it meets following criteria:

Revenue Threshold: The group has an annual consolidated revenue EUR 750 million or more in at least two of the four preceding fiscal years; and
Cross-Border Presence: At least one entity or permanent establishment outside the jurisdiction of the ultimate parent entity (UPE).

Excluded entities: Govt. Entities, International Organisations, Pension Funds (Not the Pension Service entities), Investment Funds / REITs, Non-Profits, Sovereign Wealth Funds & qualifying passive/ancillary entities.

Global Anti-Base Erosion (GloBE) Safe Harbour requirements
Applicability	Top-Up Tax may be deemed zero in a jurisdiction if Constituent Entities meet the Global Anti-Base Erosion Safe Harbour conditions.
Denial of Safe Harbour	The State Authority may deny Safe Harbour if: – ETR for the jurisdiction is < Minimum Tax Rate – GTA identifies material facts affecting eligibility within 36 months. Group must substantiate compliance within 6 months.
QDMTT Limitations	Qualified Domestic Minimum Top-Up Tax Safe Harbour has switch-off rules and non-application cases, e.g., stateless entities, partial ownership, or misaligned domestic tax base.

Computation of ETR

Understanding Who Pays the Top-Up Tax?

Entity	Rule / Obligation	Motive & Exception
Ultimate Parent Entity (UPE) / Parent applying QIIR	Applies Qualified Income Inclusion Rule (QIIR)	If QIIR applied by parent → Intermediate/partially owned parents do not need to apply IIR does not apply for this fiscal year
Intermediate Parent Entities / Partially Owned Parent Entities	Apply IIR on low-taxed Constituent Entities	Based on allocable ownership share, inside or outside Qatar
Currency & Offsets	Top-Up Tax liabilities translated to reporting currency	Offset mechanism applies if eligible under qualified rules
Domestic Minimum Top-Up Tax (DMTT)	Joint liability among domestic entities	Applies to stateless entities (Flow-through, PEs).
Priority / Hierarchy	DMTT operates first, then IIR	Ensures no double taxation

Corporate Restructurings & Tax Neutrality

Transitional Framework for Entry into the Global Minimum Tax Regime

Aspect	Treatment
ETR Determination	Include all deferred tax assets (DTAs) & liabilities (DTLs) but capped at lower of Minimum Rate or domestic rate.
Exclusions / Anti-Abuse	Exclude DTAs from artificial deductions or excluded income arising after 30 November 2021 with limited grace-period exceptions.
Transfers Before Transition	Acquiring entity must use disposing entity’s carrying value for transferred of DTAs/DTLs included in GloBE Income.
Special Provisions	Grant of zero-rate DMTT relief for MNE groups in their “Initial Phase of International Activity” (Exemption upto 5 Years) Gradual reduction of exclusion percentages instead of the standard 5%, Higher temporary rates apply from 2025–2032

Obligations by Taxpayer vs. Tax Administration

Obligations
Taxpayer
Registration & Compliance	All in-scope constituent entities (CEs), including JVs and its subsidiaries, must register with the GT via an electronic platform designated by GTA President decision. MNE groups must appoint a Designated Local Entity (DLE) responsible for registration, filing the GloBE Information Return (GIR), and managing DMTT and IIR payments.
Top-Up Tax Filing & Payment	DLE must file IIR and DMTT returns by deadlines as GLoBE Anti-Base Erosion Information Return and pay Top-Up Tax due before deadlines.
Follow General Tax Law Procedures	Income Tax Law and executive regulations govern audits, assessments, enforcements, disputes, and corrections unless otherwise specified. Forms and advance payment rules pending issuance by President.

Tax Administration / Authority of the State
Central Enforcement Role	Leads compliance, audits, risk monitoring, penalties, and international coordination under the Resolution.
Shared Compliance Oversight	Governing bodies supervise registered entities. The DLEs handle filings and enforcement guidance may be issued.
Coordinated Administration	State Authority and governing bodies exchange data may form working groups to implement Global and Domestic Minimum Tax frameworks.
Correction of Exchanged Information	If errors are identified by Partner Jurisdictions in filed returns, Authority must promptly obtain corrections and re-exchange.
Monitoring Exchange Failures	Authority must notify or respond to partner jurisdictions within 1 month if GLoBE returns are not exchanged on time.
Alignment & Record Retention	President may update electronic return format to align with OECD Inclusive Framework; exchanged info must be retained at least 5 years.
Uniform Interpretation and Application	The Authority requires that all Pillar Two rules are interpreted consistently with the OECD GLoBE commentary and administrative guidance, ensuring standardized application across entities and fiscal years.
Cross-Jurisdiction Recognition & Safe Harbour Qualification	The Authority determines whether other jurisdictions’ QDMTT, IIR, or UTPR regimes qualify for the Safe Harbour, based on OECD transitional qualifications, legislative review, and ongoing monitoring.

Reporting and Filing Deadlines

Local Filing: Each Constituent Entity must file the GLoBE Information Return (GIR), directly or via a DLE; flow-through entities file through their owners.
Cross-Jurisdiction Filing: If the GIR is filed in another jurisdiction, a local notification must still be submitted in Qatar.
GIR Filing Deadline: The GIR must be submitted within 15 months after the end of the reporting fiscal year (18 months for the transition year).
DMTT and IIR returns share the same filing deadline as the GIR.
Guidance on advance DMTT payments is expected from the GTA.
For reasonable compliance efforts, transitional penalty relief may apply and filings must follow OECD templates.

How VSTN can support

VSTN Consultancy is a Global Transfer Pricing firm with extensive expertise in the field of international taxation and transfer pricing. VSTN Consultancy has been awarded by International Tax Review (ITR) as Best Newcomer in Asia Pacific – 2024 and is ranked as one of the recommended transfer pricing firms. VSTN has also been nominated in 9 Categories under APAC, EMEA and Middle East Region ITR awards 2025. VSTN has its offices in India, Dubai, Singapore and USA.

Nithya Srinivasan, Founder of VSTN Consultancy, was named Middle East Transfer Pricing Practice Leader of the Year, recognizing her outstanding leadership and contribution to the profession. VSTN also received the Best Newcomer in the Middle East award from International Tax Review, showcasing its rapid growth and excellence in global transfer pricing advisory.

VSTN Consultancy has been honored with the Best Global Transfer Pricing Consultancy 2025 – India award at the prestigious Wealth & Finance Management Consulting Awards 2025.

Our offering spans the end-to-end Transfer Pricing value chain, including design of intercompany policy and drafting of Interco agreement, ensuring effective implementation of the Transfer Pricing policy, year-end documentation and certification, BEPS related compliances (including advisory, Masterfile, Country by Country report), safe harbour filing, audit defense before all forums and dispute prevention mechanisms such as Advance Pricing agreement. VSTNs senior partners have been ranked in ITR in the list of recognized Practitioners.

About us

VSTN Consultancy has been honored with the Best Global Transfer Pricing Consultancy 2025 – India award at the prestigious Wealth & Finance Management Consulting Awards 2025.

Locations Served

Australia	Philippines
Belgium	Singapore
Denmark	Switzerland
India	Turkey
Italy	UAE
KSA	UK
Mexico	USA
Netherlands	Zambia

Core Team

vstn

Nithya Srinivasan

Srilakshmi Hariharan

S Ranjani

E Rajesh

Nitya Joseph

Saranya Nagarajan

Triveni Palla

9:19:52/02:24.4

centest@vetmconsultancy.com

www.vstnconsultancy.com

Our Licensed Databases

SNo	Database	Provider
1	TP Catalyst	Moody’s
2	ORBIS	Moody’s
3	Loan Module	Moody’s
4	IP & Royalty Data	Moody’s
5	Royalty Rates and Benchmark Module	ktMINE
6	Services CUT	ktMINE
7	EDF-X Bond Database	Moody’s
8	EDF-X Credit Risk Analytics	Moody’s
9	Loan Module	Royalty Range
10	Transfer Pricing Documenter (formerly Thomson Reuters Onesource)	Ryan
11	Prowess	CMIE

As businesses expand across borders, navigating complex transfer pricing regulations becomes critical. At VSTN Consultancy, a global transfer pricing firm, we specialize in helping companies stay compliant and competitive across key markets including:

Whether you’re preparing for benchmarking intercompany transactions, or developing robust TP documentation, our team is here to support your international strategy and Compliance.

#TransferPricing #TransferPricingFirm#VSTNConsultancy #TaxCompliance #IndiaUAEUSA

#TPExperts#TransferPricingExperts#GlobalTransferPricingFirm

VSTN Transfer Pricing Update | Series – 3

VSTN Transfer Pricing Update | Series – 3: Decoding the New Advance Pricing Agreement (APA) Rules 2026

This third newsletter in our series on the Draft Income-tax Rules, 2026 focuses on the key amendments to India’s APA framework, highlighting important procedural, structural and compliance changes across the APA process.

Key changes include

Reassignment of Authority to the PCIT
Uniform APA filing fee of INR 20 lakh replacing the earlier slab-based structure
Pre-filing consultation not applicable for renewal cases
Separate form introduced for renewal applications (Form 54)
Rectification timeline for defective applications rationalised to 30 days from 15 days
Unilateral APA proceedings to be completed within one year from the end of the FY of admission, where possible
Prescribed conclusion timelines for APA proceedings:
1. 3 years for non-IT/ITeS cases
2. 2 years for IT/ITeS cases
Board empowered to close cases for non-compliance if not concluded within the prescribed timeline
Rollback integrated into the main APA application (Form 51), with no separate rollback form

Overall, the draft rules indicate a clear move towards standardisation, digitisation, defined timelines and enhanced reporting discipline within the APA regime.

More insights on other transfer pricing changes under the Draft Income-tax Rules, 2026 to follow in the next instalment of this series.

Open Attachment…

Draft Income-tax Rules 2026 – Update on APA Rules

Background

The draft Income-tax Rules, 2026 (“Draft rules”) have recently been released by CBDT and are open for public comments until 22 February 2026. As part of the new framework, the draft rules relating to Advance Pricing Agreements (APA) have been notified and are proposed to replace the existing APA rules under the Income-tax Rules, 1962.

The APA mechanism is a prospective transfer pricing certainty tool that enables taxpayers to agree in advance with the tax authorities on the arm’s length pricing methodology for specified international transactions for a fixed period.

The existing regime prescribes detailed procedures covering application, pre-filing consultation, negotiation, execution of the agreement, annual compliance reporting, compliance audit by the Transfer Pricing Officer, interaction with the Mutual Agreement Procedure in bilateral or multilateral cases, and tax relief mechanisms arising from APA adjustments, including secondary adjustments. It operates through prescribed forms, defined timelines, and a structured administrative process involving the APA authorities, Competent Authority, jurisdictional officers, and the TPO.

The draft Rules propose a restructuring of the APA framework, including realignment of rule references with the new Act, substitution and renumbering of prescribed forms, rationalisation of certain procedural requirements, modifications to prescribed fees and timelines, and other structural and drafting changes in reporting and processes.

The key changes are discussed in detail in the ensuing paragraphs.

Key changes in new APA rules

Key changes in the Draft rules in respect of APA are provided below:

The authority is assigned to Principal Commissioner of Income Tax as against Director General of Income Tax in the existing rules
APA filing fee – the existing tier-based structure, is replaced with a standard fee of INR 20 lakh irrespective of the value of international transactions. Pursuant to this, in case of any amendment in the APA application which results in increase in value of international transactions, there may not be any impact on the application fee paid
It is clarified that pre-filing consultation is not applicable in cases of renewal of APA
The existing form No. 3CEE is scrapped and accordingly “Withdrawal of APA application” can be done through an intimation letter, thereby simplifies the procedure
The timeline for rectification of defective application has been now rationalised to 30 days
Rollback –
- a. There is no separate form to be filed for Rollback of APA. However additional fee of INR 5 lakhs remains;
- b. The option to cover the prior years under APA is now subsumed in the main APA application i.e., Form 51;
- c. Under the existing rules, the applicant was allowed to file rollback application anytime during the process of the APA, however under the New Draft rules, the same is not explicitly mentioned.
The proceedings upon filing the application i.e., holding meetings with applicant, calling for documents / information through questionnaires, site visit, making any inquiries is mandated to be completed within one year from the end of the FY in which application is allowed to be proceeded with. While it will significantly bring down the protracted timelines, the usage of the term “where it is possible” may provide some leeway for the authorities in adhering to this rule
Conclusion of Unilateral APA

APA Timeline

Other than IT/ITeS cases Three years from the end of the FY in which the application was filed

IT/ITeS cases Two years from the end of the FY in which the application was filed
It is interesting to note that the Board may direct closure of cases if the agreement is not entered into within the aforementioned timeline, on account of non-compliance by the applicant. While this change would result in structured completion of APA cases, there is lack of clarity on the repercussions caused on account of the delay in proceedings by the authorities.
In respect of Annual compliance report (“ACR”), vide notification No. 03/2022, the filing was made online. However in the draft rules it is mentioned that the PCIT to share one copy each to Competent authority, Commissioner of Income Tax and Jurisdictional TPO. Hence one may need to await the final rules to understand the process of filing the ACR i.e., whether online or manual.
Application for Renewal of agreement to be file vide a separate form i.e., Form No. 54.
Bilateral / Multilateral APA acceptance timeline – The applicant can convey the acceptance or otherwise to the competent authority within one month from the end of the month in which the communication has been received (as against 30 days from the date of communication)

APA	Timeline
Other than IT/ITeS cases	Three years from the end of the FY in which the application was filed
IT/ITeS cases	Two years from the end of the FY in which the application was filed

The forms to be filed in connection with the APA process have undergone change. The form numbers and their corresponding changes as per the New Draft Rules is as below:

Purpose	Form No as per IT Rules 1962	Form No as per New Draft Rules 2026
Pre filing consultation	Form No. 3CEC	Form No. 50
Application for APA	Form No. 3CED	Form No. 51
Annual Compliance report	Form No. 3CEF	Form No. 52
Renewal of APA	No separate Form. To be filed vide Form No. 3CED	Form No. 54

The key changes are captured below.

Common pointers across all forms:

The overall structure of the form has been modified wherein the information is sought in the form of tabular columns, divided into Part A & Part B, annexures, etc.
The form is required to be filed online, wherein certain particulars of the form are expected to be pre-filled
Mandatory disclosure of Tax identification number of the applicant

Specific changes

A. Pre-filing consultation – Form No. 50

The form is simplified wherein the following contents are removed from the existing Form 3CEC:

Identification of third party comparable;
Arm’s length price / profit level indicator computation details
Details of critical assumptions
The history of the Competent Authority issues, requests and settlements

B. Application for APA – Form No. 51

The form subsumes application for forward looking as well as for the rollback years;
The details of business locations of the Applicant along with the employee headcount is required to be provided;
The form requires the result of application of proposed TPMs to the covered transactions for the 5 prior years’ operations and the time period applicant wants to cover in APA as against the 3 years in Form 3CED. Further the discussion and the quantification of the variance between existing and proposed TPM of those 5 years also to be provided;

C. Annual Compliance Report – Form No. 52

The details of adjustment is required to be disclosed in a structured manner wherein the manner of computation of adjustment in case of respective PLI (i.e., OP/OC or OP/OI) is provided explicitly;
In Form 3CEF, a general field seeking the applicant to demonstrate that the applicant had fulfilled all other terms & conditions of the APA without any specific mention of terms. However, in the new form, the following are explicitly sought to be presented:
- Details on Invoicing and Credit terms including frequency of raising invoices by applicant/AE, adherence to the timeline as mentioned in the APA, payment / realisation of invoice as agreed in the APA, whether interest is offered in case of any delay;
- Compliance with provisions relating to Secondary adjustment (Sec. 170) and interest deductions (sec. 177);
- Confirmation on the preparation of segmental accounts, if applicable;
- Certification from Chartered Accountant / Management accountant / Chartered Engineer etc., as applicable;
- Confirmation on maintenance / furnishing of documentations, if any, as specified in the APA;

D. Renewal of APA – Form No. 54

The main APA application form is replicated for renewal with the following inclusions:
Acknowledgment number of the original APA filed
Question on changes, if any, with regard to the information submitted in respect of the main APA application

It is interesting to note that the details of Roll back (fee, roll back years, etc.,) are also retained in the form. However the same may not be applicable in case of renewal. Perhaps the same might be removed in the final rules.

Key Takeaways

The draft APA rules under the Income-tax Rules, 2026 represent a structured refinement of the existing framework rather than a substantive policy shift. The changes focus on administrative realignment, procedural simplification, standardisation of fees, and introduction of clearer timelines, particularly for unilateral APAs. While certain formalities have been streamlined, the fundamental architecture and intent of the APA programme remain intact.

Since rollback is subsumed in the main APA application itself, the procedure for withdrawal of rollback during the APA process is unclear at present. If the same is not entertained, one may need to strategize the APA, whether to avail the rollback provisions or not, well in advance to avoid any probable hassle.

While the defined timelines for APA conclusion is a welcome move, it calls for greater preparedness from the applicant’s side in ensuring timely action towards filing response to the questionnaires, cooperation with the APA authorities during the site visits, etc.

The flat fee structure and removal of certain procedural requirements reduce administrative complexity but also place greater emphasis on strategic planning before filing or seeking amendments

About us

VSTN Consultancy has been honored with the Best Global Transfer Pricing Consultancy 2025 – India award at the prestigious Wealth & Finance Management Consulting Awards 2025.

Locations Served

Australia	Philippines
Belgium	Singapore
Denmark	Switzerland
India	Turkey
Italy	UAE
KSA	UK
Mexico	USA
Netherlands	Zambia

Core Team

vstn

Nithya Srinivasan

Srilakshmi Hariharan

S Ranjani

E Rajesh

Nitya Joseph

Saranya Nagarajan

Triveni Palla

9:19:52/02:24.4

centest@vetmconsultancy.com

www.vstnconsultancy.com

Our Licensed Databases

SNo	Database	Provider
1	TP Catalyst	Moody’s
2	ORBIS	Moody’s
3	Loan Module	Moody’s
4	IP & Royalty Data	Moody’s
5	Royalty Rates and Benchmark Module	ktMINE
6	Services CUT	ktMINE
7	EDF-X Bond Database	Moody’s
8	EDF-X Credit Risk Analytics	Moody’s
9	Loan Module	Royalty Range
10	Transfer Pricing Documenter (formerly Thomson Reuters Onesource)	Ryan
11	Prowess	CMIE

Whether you’re preparing for benchmarking intercompany transactions, or developing robust TP documentation, our team is here to support your international strategy and Compliance.

#TransferPricing #TransferPricingFirm#VSTNConsultancy #TaxCompliance #IndiaUAEUSA

#TPExperts#TransferPricingExperts#GlobalTransferPricingFirm

VSTN Transfer Pricing Update | Series – 2

VSTN Transfer Pricing Update | Series – 2: Decoding the New Safe Harbour Rules

This second alert on draft Income Tax Rules, 2026 turns the spotlight on the key amendments to India’s Safe Harbour Rules, unpacking how the updated definitions, eligibility conditions, and compliance timelines reshape the landscape for eligible assessees.

Introduction of Form 49

1. Streamlined Compliance: A single Form (Form 49) now replaces multiple legacy forms (Form 3CEFA, 3CEFB & 3CEFC), consolidating the entire Safe Harbour application into one unified filing
2. Form 49 timelines- IT services get flexibility (file anytime in Tax Year 1 or up to 30 June of following year). For all other categories, the deadline stays tied to the ITR due date
3. Form 49 introduces a simplified structure by grouping all safe harbour transactions into three broad buckets- Eligible International transactions, Eligible SDT, & Eligible businesses
4.The new form brings in threshold‑driven confirmations for specified transactions, marking a shift from the earlier forms that did not mandate such disclosures.
5.Additional requirement to upload the accountant’s certificate certifying the cost pool allocation in relation to receipt of Low value adding Intra Group services

Key Safe Harbour Reforms

In line with the safe harbour reforms introduced in the Budget, relevant updates have been incorporated in the draft IT Rules

1. Separate, simplified rule now introduced exclusively for the SH procedure relating to IT services, along with automated verification process
2. Responsibility for identifying “low-risk” players has moved from AO/TPO to DGIT (Systems) for IT, ITeS, and KPO—replacing manual scrutiny with automated, tech-driven validation
3. Unified Margin with increase in threshold: All IT services (Software, ITeS, KPO, R&D for SWD) merged into a single category with a reduced 15.5% SH margin accompanied by a substantial raise in threshold to ₹2,000 Crore, bringing more mid-sized firms into the fold.
4. 5-Year Lock-in: Once applied, the safe harbour for IT services can be continued for 5 consecutive years.
5. New Sector Incentives: SH rates of 15% margin on cost for Data Centres and 2% of gross receipts for custom bonded warehousing.

More alerts related to the other transfer pricing aspects in the draft Income Tax Rules to follow in next instalment of this series.

Open Attachment…

Draft Income Tax Rules – Update on Safe Harbour Rules

1) Provision of IT services*; 2) Others: – Provision of contract R&D services wholly or partly relating to generic pharmaceutical drugs – Manufacturing & export of core auto components – Manufacturing & export of non-core auto components – Provision of data centre services (NEW) – Advancing intra-group loans by eligible assessee – Providing corporate guarantee by eligible assessee – Receipt of low value-adding intra-group services

*Common category for Software development, ITeS, KPO & Contract R&D in relation to software development

Changes in Form No.49

Particulars	Additional requirements
1. IT services	Tax Years for which option is to be exercised to be included
2. Transaction categories	Clubbing of 4 service categories into IT services, inclusion of Data centre services and Eligible business of component storage in bonded warehouses
3. Advancing of intra-group loans	• If the loan is in foreign currency, there is a checkbox requirement (Yes/No) to confirm whether the total loan advanced to all AEs exceeds INR 250 crores as on 31st March of the tax year • In cases where credit rating is not available and the loan is in Indian currency, there is a checkbox requirement (Yes/No) to confirm that the total loan advanced to all AEs does not exceed INR 100 crores to determine the eligibility.
4. Provision of Corporate Guarantee	• Checkbox requirement (Yes/No) to confirm whether the amount guaranteed exceeds INR 100 crores • Further, AE credit rating and credit rating agency to be disclosed only if amount guaranteed exceeds INR 100 cr.

Particulars	Additional requirements
5. Receipt of low value-adding intra-group services	Checkbox requirement (Yes/No) to confirm if the value of transactions including markup ≤ 5% exceeds INR 10 crores, to determine eligibility for SH Additional requirement to upload the accountant’s certificate certifying the cost pool allocation Specific requirement to disclose the Date and UDIN of accountant’s certificate Amount of EIT excluding mark-up and amount of EIT including mark-up to be separately shown
6. ESDT (Supply of electricity or transmission of electricity or wheeling of electricity)	The old form required details of relevant order of the Appropriate Commission determining the tariff or approving the methodology for determination of the tariff, whereas the new form specifically asks for the date, type and validity of such order
7. ESDT (Purchase of milk and milk products)	Earlier, taxpayers were required to furnish exhaustive details regarding the quantity, rate, and milk-equivalent of dairy products purchased, along with verification of uniform payment to members. Such granular details are no longer required in Form 49. Instead, Form 49 seeks procedural confirmations on whether the procurement rate is fixed based on quality (SNF content) and is independent of milk volume, shareholding, and voting power of the members.
8. Eligible business (sale of raw diamonds and component storage in bonded warehouse)	Confirmation (yes/no) that: – No further deduction under section 28 to 34, 44 to 49, 51,52, Schedule IX and X has been claimed – Written down value of assets is deemed to have been calculated as if the assessee had claimed the depreciation – No set off of unabsorbed depreciation under section 33(11) or carried forward loss under section 112(1) has been claimed – No set off of loss from other business under section 108(1) or other head under section 109 has been claimed

Hence, the new form outlines the mandatory deduction and set-off restrictions applicable when opting for SH for EB. These restrictive provisions are designed to ensure that the profit% of 4%/2% is final, preventing taxpayers from further reducing their taxable income through additional claims

New Rule 91 on SH procedure for IT services

A separate, simplified rule has now been introduced exclusively for the SH procedure relating to IT services. Under the earlier framework, the procedural requirements for all eligible international transactions were consolidated within a single rule, without distinction between different categories. The new structure therefore streamlines compliance by carving out a dedicated procedure specifically for IT services, as promised by the 2026 Budget. The key provisions are outlined below:

1. Duration

Once exercised validly, the SH remains in force for 5 consecutive tax years.
If an Assessee withdraws their option (by furnishing a declaration), they cannot re-exercise it until the original 5-year period expires.

2. Application filing

Form No. 49 to be submitted and verified electronically (Digital Signature or EVC) to the DGIT (Systems).
Must be filed during the first tax year and not beyond 30th June of the following year

3. Automated verification & approval process

The system verifies if the assessee and transactions are ‘eligible’ and the option is valid.
Acceptance or rejection will be communicated within two months from the end of the filing month.
Application will be rejected only upon providing specific reasons and after giving an opportunity to the assessee to rectify any identified defects.

4. Annual compliance

For each of the four years following the first year, a statement detailing quantum of eligible transactions and profit margins achieved must be filed before filing the tax return (Format of the statement yet to be specified).
Upon acceptance, the assessee must file tax returns for each of the 5 years as per SH provisions on or before the due date for filing return of income
The Assessing Officer can make reference to the TPO for transactions other than the eligible IT services covered by the SH.

Further it is specified that the DGIT (Systems) with the approval of CBDT can lay down any further data structure, formats or procedures in connection with furnishing/verification of the above documents, including any required modifications.

For an assessee to qualify as an eligible assessee in respect of IT services, the conditions relating to assumption of only insignificant risks and the foreign principal performing the economically significant functions will continue to apply. In this context, actual conduct takes precedence over contractual terms.

The responsibility to determine whether an assessee is an eligible assessee, bearing insignificant risk, for contract R&D lies with AO or TPO or DGIT (systems) whereas it has been shifted from AO/TPO to DGIT (Systems) for software development, ITeS & KPO services.

Note: As the new category of Data center services are not covered under the provision of IT services, one has to follow the general procedures relating to the other eligible transactions, which involve verification of the SH Application by tax authorities.

Relaxation in Accountant definition

To support the government’s vision of home-grown accounting and advisory firms to become global leaders, the definition of Accountant for the purposes of SH Rules has been rationalised, as announced in the Budget. The definition of Accountant is relied in the SH Rules only in connection with the management services safe harbor, for certification of the cost pool. The earlier rule provided a preference to Global firms for the certification as it requires the firm certifying the same to be present in more than 2 countries.

Currently the requirement to have presence in more than two countries has been removed for Indian Chartered Accountants who are members or partners in accountancy or valuation services entities. This condition is now applicable only in the case of persons recognised for undertaking cost certification by the Government of the country where the associated enterprise is registered or incorporated or any of its agencies.

Further the revenue threshold to be fulfilled by an Accountant has been relaxed:

Accountant pursuing the profession of accountancy individually or is a valuer – Annual professional receipts in the year preceding the year in which cost certification is undertaken > INR 50 lakhs (Old rule- Rs. 1 crore);
Member or partner in an accountancy or valuation services entity – Annual receipt of the entity in the year preceding the year in which cost certification is undertaken > INR 3 crores (Old rule- Rs. 10 crores).

2026-27 and shall continue to apply for subsequent block periods, unless modified. However, for transactions other than IT services, the SH application in Form No. 49 will still need to be filed for each individual year.

Further, with updates to the SH Rules as per Budget 2026, the corresponding changes have been incorporated in the SH rates in the draft Rules:

Particulars	PLI/Base	Old rate	New rate
1. Software development service	Operating profit / Operating expense (OP/OE)	17% if transaction value ≤ INR 100 crores, 18% if transaction value > INR 100 crores but ≤ INR 300 crores	Consolidated rate of 15.5% for IT services, if aggregate operating revenue ≤ INR 2,000 crores in the tax year
2. IT enabled services
3. Knowledge processing outsourcing services
4. Contract R&D relating to software development
5. Data centre services				OP/OE	–
6. Eligible business of storage of components in a bonded warehouse for sale to a contract manufacturer	Gross Receipts	–	Profits and gains chargeable to tax shall be ≥ 2%

New / Updated definitions

The following definitions have been included in connection with SH in the new Rules:

Data centre and Data centre services, Contract manufacturer, Custom bonded area, Eligible assessee, Eligible business, Gross receipts and Specified electronic goods in connection with the business activity of storage of components in a warehouse in a custom bonded area for sale to a contract manufacturer.

Key considerations

More clarity is needed on whether SH for IT services can be opted for a period shorter than five years, or if only a continuous 5 year term is permitted. More guidance is also required on whether, if the assessee withdraws from the Safe Harbour regime for IT services during the 5 year period, such withdrawal will have retrospective effect or apply only prospectively to future years. As the cost allocation certificate for low value-adding services must be filed together with the SH form, it should be obtained in advance. Timely coordination with the AE’s location will be required to obtain the certificate. Under the current and prior SH Rules, five factors must be assessed to determine whether an Assessee qualifies as an eligible Assessee with insignificant risk. It remains to be seen how this will be implemented in practice, in the case of IT service providers where the verification process has now become automated.

About us

VSTN Consultancy has been honored with the Best Global Transfer Pricing Consultancy 2025 – India award at the prestigious Wealth & Finance Management Consulting Awards 2025.

Locations Served

Australia	Philippines
Belgium	Singapore
Denmark	Switzerland
India	Turkey
Italy	UAE
KSA	UK
Mexico	USA
Netherlands	Zambia

Core Team

vstn

Nithya Srinivasan

Srilakshmi Hariharan

S Ranjani

E Rajesh

Nitya Joseph

Saranya Nagarajan

Triveni Palla

9:19:52/02:24.4

centest@vetmconsultancy.com

www.vstnconsultancy.com

Our Licensed Databases

SNo	Database	Provider
1	TP Catalyst	Moody’s
2	ORBIS	Moody’s
3	Loan Module	Moody’s
4	IP & Royalty Data	Moody’s
5	Royalty Rates and Benchmark Module	ktMINE
6	Services CUT	ktMINE
7	EDF-X Bond Database	Moody’s
8	EDF-X Credit Risk Analytics	Moody’s
9	Loan Module	Royalty Range
10	Transfer Pricing Documenter (formerly Thomson Reuters Onesource)	Ryan
11	Prowess	CMIE

Whether you’re preparing for benchmarking intercompany transactions, or developing robust TP documentation, our team is here to support your international strategy and Compliance.

#TransferPricing #TransferPricingFirm#VSTNConsultancy #TaxCompliance #IndiaUAEUSA

#TPExperts#TransferPricingExperts#GlobalTransferPricingFirm

KSA- Transfer Pricing Landscape

As the transfer pricing is an evolving subject in the Kingdom of Saudi Arabia, it is imperative for the taxpayers in KSA to focus on the annual compliance requirements. With the inclusion of 100% Zakat payers in the purview transfer pricing Bylaws applicability, the ZATCA has sent a clear indication to include more taxpayers in the TP Bylaws. This is more evident from the applicability of TP Bylaws to RHQs.

The KSA TP Bylaws has a robust documentation requirement including disclosure forms and affidavits supported by the basic general documentation which are mandatory for all the taxpayers under the TP Bylaws. The KSA also requires the taxpayers to maintain additional documentation if the taxpayers meet certain monetary threshold. Though the KSA TP Bylaws does not provide the safe harbour option, the taxpayers can get certainty through APA.

Further the alert also focusses on the transfer pricing considerations #RHQs should bear in mind while claiming the tax exemption.

The Flyer touches all the above aspects while highlighting the compliance requirements for each category of taxpayers.

Do reach out to VSTN in case of any queries or support in KSA.

Open Attachment…

KSA Transfer Pricing Flyer Overview of TP compliances

Kingdon of Saudi Arabia had introduced transfer pricing Bylaws in the year 2019. The Bylaws were constantly updated to include more persons under the purview of transfer pricing regulations of KSA from time to time aligned with the OECD guidelines. The Bylaws lays down the detailed guidance on the applicability, covered persons, covered transactions and approach for determining arm’s length criteria of the controlled transactions, a framework to set prices for Controlled Transactions, including but not limited to transfers of goods, services, loans and Intangibles (intellectual property). Besides loans, other financial transactions are also covered in this Guideline, for instance, guarantees, factoring and hedging

The following persons are covered under the TP Bylaws of the KSA covering both the domestic and cross border transactions:

Taxpayers subject to 100% income tax
Mixed Companies to the extent that the Mixed Company is subject to income tax in the Kingdom.
100% Zakat Payers
Small Enterprises, investment funds, and wholly government – owned companies that are exempt from Zakat collection

Identify of Related Persons

Related persons means two or more natural persons having relation or partnership

A natural person is related to juridical person in case of either him or his related person together exercises controls (directly or indirectly or both) voting rights income or capital of a company or partnership or juridical person Two juridical persons are related when there is a common control on them, one controls the other or the persons having effective control over them are related

Identification and delineation of controlled transactions

Broad- based analyses including the industry sector and other relevant items of the MNE Group such as business strategies, supply chain and key functions assets and risks
In depth- analysis including the determine the contractual terms of the Transaction; Functional and Risk Analysis for each Related Person part of the Controlled Transaction; Characteristics of the property transferred, or services provided; The economic circumstances of the market in which the Related Persons operate; and the Business strategies pursued by the Related Persons
Determination of most appropriate method and its application to determine the uncontrolled transactions

Documentation

In general, the KSA transfer pricing guidelines and Bylaws impose four documentation requirements i.e., Disclosure Form and Affidavit, General documentation, Local File, Master File and Country- by- Country Report

Implementation

Reporting of the Controlled Transactions in the commercial accounts based on the existing accounting rules in the KSA
Making Periodical adjustments and year- end adjustments before filing the tax return as all Controlled Transactions must be reported in the Disclosure Form and the tax returns in accordance with the Arm’s Length Principle
KSA will only allow a downward corresponding adjustment if there is a DTA in place

Compliance Requirement	Natural Person	100% Zakat payers	Taxable person subject to 100% income tax / Mixed Companies	Due date	Penalty
TP Bylaws	No	Yes	Yes	—	—
Disclosure Form & Affidavit	No	Yes	Yes	Within 120 days from the end of fiscal year i.e. Calendar Year	Incorrect Disclosure Forms: SAR 100,000 – SAR 500,000.
General TP Documentation	No	Yes	Yes	On request from the Authority – Within 30 Calendar days	—
Local File	Yes. Aggregate Value of Related Party Transactions till 2027:	Yes. Aggregate Value of Related Party Transactions ≥ SAR 6 million annually	Yes. Aggregate Value of Related Party Transactions ≥ SAR 6 billion annually	On request from the Authority – Within 30 Calendar days	Penalty for Late/Missing Documentation (Local/Master File): SAR 50,000 – SAR 100,000 per violation. Tax Evasion via TP Manipulation: A penalty of SAR 1 million, plus 300% of the tax difference.
Local File				On request from the Authority – Within 30 Calendar days
Master File	No	Aggregate Value of Related Party Transactions after 2027 > SAR 48 million	Yes. If the consolidated group revenue is ≥ SAR 3,200,000,000 (approx. EUR 750 million) in the reporting year immediately preceding the current reporting year	Yes. If the consolidated group revenue is ≥ SAR 3,200,000,000 (approx. EUR 750 million) in the reporting year immediately preceding the current reporting year	within the 12-month period immediately following the end of the reporting year of its MNE group
Country – by – Country Report	No	Yes, if the consolidated group revenue is ≥ SAR 3,200,000,000 (approx. EUR 750 million) in the reporting year immediately preceding the current reporting year	Yes. If the consolidated group revenue is ≥ SAR 3,200,000,000 (approx. EUR 750 million) in the reporting year immediately preceding the current reporting year	Within 120 days from the end of fiscal year i.e. Calendar Year	—
Country – by – Country Notification	No	Yes	Yes	—	—

Local File provides detailed information on Controlled Transaction with the Taxable Person and is, accordingly, supplementary to the Master File. The information required under Local File is consistent with the OECD guidelines

CbCR Notification Form: Every Taxpayer who is a Constituent Entity of an MNE Group must submit to the Authority a CbCR Notification (part of Tax/Zakat Return) no later than 120 days after the last day of the Taxpayer’s Reporting Year. The CbCR Notification must include information on the identity of the Reporting Entity of the MNE Group, its country of tax resident and the country in which the Reporting Entity submits the CbCR

TP Disclosure Form: The Disclosure Form of Controlled Transactions is used by the Authority to conduct a high level Transfer Pricing Risk Assessment. Additional information supporting the Transfer Pricing position taken may be requested by the Authority

Master File provides an overview of the MNE’s global business, the Transfer Pricing Policy and economic activities/ functions of the Related Persons. The information required under Master File is consistent with the OECD guidelines

CA Affidavit: If Sections 1 (the Disclosure Form) and Section 2 (the CbCR Notification Form) are completed accurately, the Taxpayer must attach the Chartered Accountant Certificate declaring that the Transfer Pricing policy of the MNE Group is consistently applied in relation to the Taxpayer in the KSA. With respect to the Chartered Accountant Certificate, GAZT accepts both “limited” and “reasonable” assurance engagements (as endorsed by Standing Committee on Public Accounts) as long as the certificate is provided by a licensed auditor in KSA

Country- by- Country report includes Tax Jurisdiction- wide information on various information relating to the MNE’s global activities: In principle, the Ultimate Parent Entity (UPE) or Surrogate Parent Entity (SPE) should submit the CbCR

General TP Documentation: Applicable to all the taxpayers having controlled transactions where TP Bylaws apply. No specific requirements prescribed and therefore applies a format- free approach. Generally, most information listed in the Bylaws under the Master File and Local File should be documented, including in particular a Functional Analysis and an economic analysis.

The Authority may direct any Person (as listed in the Bylaws) to prepare and maintain documentation related to Controlled Transactions and to request such Person to provide such documentation within the time which shall in all cases be no less than Thirty (30) days from the date of the Authority’s request

Key Features of RHQ

Valid License & Permitted Activities: Must have valid license and the activities covered under such license. The main activities of the RHQ are restricted to strengthening the group’s profile in the region, providing strategic supervision, administrative guidance and support for the internal business of the Company, subsidiaries, and other related companies. Optional activities such as sales and marketing. RHQ should earn income from only the above activities and must incur operational expenditure in relation to its activities. Related persons shall have the same meaning as the TP Bylaws of KSA
Tax Benefits: Zero percent income tax and zero percent withholding tax for 30 years.
Personnel Requirements: Must have at least one resident director in RHQ. Must employ adequate employees with adequate qualification and skill set to conduct such activities
Accounting & Reporting : Must prepare and maintain the books of accounts for each full and partial tax years and file the tax returns and Zakat Returns
Transfer Pricing Compliance: RHQ must comply with Transfer Pricing Bylaws of KSA and must ensure all the transactions with related persons are conducted at arm’s length
Authority Oversight & Ruling Requests: The Authority has powers to carry out the audit, call for any information and monitor the fulfilment of economic substance in respect of RHQ in accordance with the procedures and provisions outlined in the relevant Tax and Zakat laws. RHQ may submit a request for a Ruling to the Tax authorities to provide interpretation and clarifications on tax rules and Bylaws
Penalties: Penalties outlined in the Tax and Zakat laws apply to RHQ

Transfer Pricing Considerations

Functions, Assets & Risk (FAR) Analysis: Conducting a detailed Functions, Assets and Risk analysis to support the licensed activities of RHQ
Transfer Pricing Method Selection: Evaluation of the most appropriate method to commensurate with the key licensed activities of RHQ
Intercompany Agreement vs. Conduct Analysis: Thorough analysis of the terms of the intercompany agreements vis-a-vis conduct of the parties to substantiate economic substance
Controlled Transaction Evaluation: Evaluate controlled transactions to identify the deviations from the eligible income and expenditures of the RHQ
Periodic & Year-End Adjustments: Thorough periodical and year-end adjustments to meet the arm’s length principle requirements
Extensive Documentation: Maintain extensive documentation in relation to the above to substantiate the arm’s length nature of the controlled transactions
Compliance with Bylaws: Meet the robust documentation requirements as per the Bylaws to avoid penal consequences

The KSA has not implemented the global minimum tax and qualifying domestic minimum tax pursuant to OECD pillar 2

Highlights of APA Program

APAs can be requested for related party transactions with a minimum value of SAR 100,000,000. Exemption to certain complex transactions from this threshold can be granted by the governor
A comprehensive application must be submitted at least 12 months before the first financial year covered by the APA
The duration of the APA is three years
Currently, there are no fees associated with the application for the APA
Annual Compliance Report is to be submitted annually during the period covered by the APA

Benefits of APA Mechanism

Managing TP risks
Achieve tax certainty and
Minimize the potential for disputes with the tax authority

A tailored approach considering the industry and operations of the taxpayers of the KSA

Timely analysis on applicability of the Bylaws including amendments and updates
Evaluation of existing transfer pricing policies and intercompany agreement to identify the risks and frame mitigation strategies
Periodic monitoring and evaluation of the controlled transactions to advise on the arm’s length requirements
End to end assistance in Annual TP Compliance
Upfront advise on future transactions including evaluation of APA and Rulings as an option

Specific Support to RHQ

Detailed documentation with FAR analysis Analysis of Cost- Plus Vs Profit Split Framing the risk mitigation strategies for RHQ in addition to the annual compliance
Evaluation of Pillar 2 implications in case RHQs and Special Economic Zones for inbound MNCs which have IIR implemented

About us

VSTN Consultancy has been honored with the Best Global Transfer Pricing Consultancy 2025 – India award at the prestigious Wealth & Finance Management Consulting Awards 2025.

Locations Served

Australia	Philippines
Belgium	Singapore
Denmark	Switzerland
India	Turkey
Italy	UAE
KSA	UK
Mexico	USA
Netherlands	Zambia

Core Team

vstn

Nithya Srinivasan

Srilakshmi Hariharan

S Ranjani

E Rajesh

Nitya Joseph

Saranya Nagarajan

Triveni Palla

9:19:52/02:24.4

centest@vetmconsultancy.com

www.vstnconsultancy.com

Our Licensed Databases

SNo	Database	Provider
1	TP Catalyst	Moody’s
2	ORBIS	Moody’s
3	Loan Module	Moody’s
4	IP & Royalty Data	Moody’s
5	Royalty Rates and Benchmark Module	ktMINE
6	Services CUT	ktMINE
7	EDF-X Bond Database	Moody’s
8	EDF-X Credit Risk Analytics	Moody’s
9	Loan Module	Royalty Range
10	Transfer Pricing Documenter (formerly Thomson Reuters Onesource)	Ryan
11	Prowess	CMIE

Whether you’re preparing for benchmarking intercompany transactions, or developing robust TP documentation, our team is here to support your international strategy and Compliance.

#TransferPricing #TransferPricingFirm#VSTNConsultancy #TaxCompliance #IndiaUAEUSA

#TPExperts#TransferPricingExperts#GlobalTransferPricingFirm

VSTN – Transfer Pricing Update | Series – 1

VSTN – Transfer Pricing Update | Series – 1: New Form 48 Notified replacing Form No. 3CEB

The draft Income-tax Rules, 2026 has been released by the CBDT, inviting inputs / comments from stakeholders and public by 22 February, 2026.

Considering the revamp of the Income -tax Act and Income-tax Rules in its entirety, VSTN will be capturing the changes on Transfer pricing related aspects in a “Series”.

The First alert in this series covers Form No. 48, which was erstwhile Form No. 3CEB. This marks an important development in the transfer pricing compliance arena. The revamped form has enhanced disclosure requirements which is aimed at improving transparency and aiding tax authorities in assessing the intra-group transactions of the MNEs. VSTN’s alert elaborates the major changes in Form No. 48.

Key highlights include:

Clear segregation of transactions as received and paid
Mandatory disclosure of details under Advance Pricing Agreements (APAs)
Explicit listing of transaction categories in drop down menus for clarity
Additional disclosures for royalty, corporate guarantees, and inter company financing
Capturing of costs relating to free of cost assets and expenses
Disclosure of the economic adjustments made to the comparables
Emphasis on maintaining updated intercompany agreements and robust documentation
Cautious application of the aggregation concept, with method wise ALP determination

While clarity is being awaiting on the benchmarking considerations for taxpayers with transaction threshold less than INR 1crore and taxpayers proposing to opt for Safe Harbor Rules, documentation remains as the heart of transfer pricing.

More alerts related to the other transfer pricing aspects in the draft Income Tax Rules to follow in next instalment of this series.

Open Attachment…

Draft Income Tax Rules Form 48 (replacing Form 3CEB) February 2026

Background

The draft Income Tax Rules, 2026 have been released by CBDT recently and is open for feedback from stakeholders and public till 22nd February 2026. As part of the new Rules, the draft Form 48 has been released which is set to replace the existing Form No. 3CEB.

The old Form No. 3CEB was a simple certificate from an accountant covering the following information for companies who have entered into transactions with their associated enterprises (‘AE’s’):

Name and address associated enterprises
Transaction with such associated enterprises
Nature of transaction whose disclosure is split across various clauses
Actual value of such transaction and the arm’s length price
Method in which the transactions are certified to be at arm’s length.

An exhaustive set of key elements relating to transfer pricing documentation is required to be covered under Draft Form No. 48. The key aspects of the Accountant’s Form are captured in the ensuing paragraphs.

Major changes in new Form 48

The major changes in the new Form 48 can be categorized under the following broad heads:

A. Changes to the structure of the form wherein the existing information covered under erstwhile Form 3CEB is rearranged in the new Form (Structural changes)
B. Introduction of additional items to the new form which was not covered in the erstwhile Form 3CEB which is highly critical and invite the attention of the taxpayer (Qualitative changes);

A. Structural changes

Overall structure of the form has been changed. The new Form 48 is a digital form with Parts A to F.
- Part A – Particulars of the Assessee
- Part B – Aggregate value of transactions
- Part C – International transactions (including. deemed international transactions)
- Part D – Specified Domestic Transactions
- Part E – Arm’s Length Price (ALP) determination
- Part F – Documentation
AE identification ID (in case of international & specified domestic transactions) and Person identification ID (in case of deemed international transactions) are required to be provided in point 5 which is used as reference in all other parts of the form. Similarly, the Transactions ID’s are required to be provided for each transaction which is used for mapping in Part E where ALP determination details are being provided.
Tax Identification Number is made mandatory in cases where PAN is not available, and where Tax identification is unavailable Unique Identification Number will have to provided. Hence, Indian taxpayers will have to obtain and furnish the TIN from the respective Associated enterprises with whom international transactions have been entered into.
The taxpayer has been provided with the option to choose their ‘relationship with AEs’ under multiple categories in Part C of the form.
Transaction disclosure requires selection of transactions from the available drop-down list. These transactions have been categorized by type, with corresponding information provided in the notes.
Code for nature of business that was required in Part A of Form 3CEB has now been deleted.
Clause references are removed completely. Unlike Form 3CEB, no specific clause has been provided for each category of transaction. All the international & deemed international transactions are listed in point 7 and specified domestic transactions are listed in point 9.
The draft Form 48 does not seem to have specific provision for providing any comments/ notes.

B. Qualitative changes

The aggregate value of international, deemed international transactions and specified domestic transactions have been segregated as ‘received’ and ‘paid’ categories and disclosed separately. This section would be auto-populated from relevant sections.
Assessee’s who have entered into Advance Pricing Agreements (APAs) are subject to additional disclosure requirements where the details of concluded APAs are required to be provided including the date of agreement, acknowledgement number of the application, details of transactions covered under the APA and the value of such transactions.
Part E is introduced to disclose how ALP has been determined for each of the international/deemed international or SDTs. This section requires disclosure of:
- Whether the transactions have been tested on a standalone basis or on an aggregated basis;
- The amount so aggregated, if applicable;
- If aggregation approach is not adopted, the amount that has not been aggregated;
- The method adopted to substantiate those transactions not aggregated.
Detailed disclosures are required for the determination of ALP under each of the prescribed methods, as tabulated below:

Method Details to be provided in Form 48

CUP – Number of comparables identified
– In case of 1 comparable – the arm’s length price of that comparable
In case any transaction which are not included or have been partially included in the benchmarking approach and alternate approach has been adopted, then similar details are required to be provided for each of the transaction that is being benchmarked separately.
The ALP determined by adopting each of the above methods and suo-moto adjustment, if any on account of non-fulfilment of the arm’s length criteria, are required to be provided in Part E. The manner of computation of adjustment and its impact on the book value have all been detailed in the notes.
The revised form requires the taxpayers to disclose any economic adjustments applied to the comparable companies.
The form requires disclosure of whether the documentation requirements apply to the assessee, and if so, confirmation that appropriate records substantiating the arms’ length pricing is being maintained.
The disclosure requirements for issue and buy-back of shares and convertible debentures have been removed.
Specific disclosure requirements have been mandated for Royalty / Corporate Guarantee / Intercompany financing – such as providing the date of agreement, royalty/interest/guarantee rates, currency and value.
Additional disclosure requirements for the below including details of whether the same is recorded in the books and considered for computation of ALP:
- a. Stock compensation
- b. Cost and depreciation related to assets/software/tools developed in-house or purchased by AEs
- c. Training expenses/other cost incurred by the AE on behalf of the assessee
- d. Costs incurred by AE that is utilised in the business operations of the assessee
- e. Income arising from forex fluctuations
- f. Income from subsidy/grant/duty drawback or concession by Central/State government.
The disclosure relating to business restructuring or reorganisation, regardless of whether it impacts the enterprise’s profits, assets, or income/loss has been retained similar to existing Form 3CEB.

Method	Details to be provided in Form 48
CUP	– Number of comparables identified – In case of 1 comparable – the arm’s length price of that comparable

The maintenance of transfer pricing documentation is a key requirement, and such documentation must be prepared before Form 48 is filed and there is no waiting for scrutiny before preparing the documentation. MNEs are therefore obligated to comply from day one of the financial year. Considering the requirement to disclose the benchmarking results for each transaction, one may need to undertake necessary benchmarking analysis to substantiate the information disclosed in the form.

The transactions requiring disclosure are explicitly listed in the drop- down menu – for example, the intangibles to be considered as purchase of intangibles, types of financing agreements to be disclosed, nature of intra- group services requiring disclosure, thereby providing more clarity on the disclosure requirements. Previously, taxpayers, out of abundant caution would report the issue of shares as an international transaction as the Clause in Form 3CEB was not eliminated though the Supreme Court ruling in Vodafone India Services Private Limited had excluded share issue from the TP provisions. However, since the revised form no longer includes this aspect, it appears that the CBDT has considered the position of the Supreme Court on the reporting as well. The disclosure requirements in Form 48 are designed to assist tax authorities in compiling relevant information and tracking the assessee’s intra- group transactions and related tax implications. Such information may also be utilized by other regulators through exchange of information. Owing to the same, the interplay between transfer pricing and other regulations such as customs, FEMA regulations should also be carefully considered by the MNEs while structuring their intra- group transactions and also maintain appropriate documentation and ensure alignment on conduct vs. contract. The taxpayers are required to explicitly disclose the margins earned by the tested party vis- a- vis the comparables, which are expected to further aid ‘risk- based assessment’ approach based on which the TP audits are selected for scrutiny. In computing margins under the TNMM, the form considers only the net profit margin. This raises uncertainty as to whether alternative profit level indicators—such as cash profit margins—would be deemed acceptable. While providing the flexibility to undertake economic adjustments on the comparables is a welcome move, the form does not provide any option for undertaking adjustments on the tested party – an approach that has, until now, been widely accepted by the judiciary. For specified domestic transactions, a detailed list on the type of transactions falling under the transfer pricing purview have been explicitly provided, offering greater clarity on these aspects. The enhanced disclosure requirements relating to royalty, guarantee and financing transactions highlight the importance of maintaining proper inter- company contracts/documents while also underscoring the need to keep such agreements regularly updated.

Where Taxpayers are opting for Safe Harbour, clarity is awaited on whether a separate section will be included similar to that of APA, since the taxpayers would otherwise have to undertake a detailed benchmarking analysis for justifying the ALP that is already prescribed / agreed in the Safe Harbour Rules.

In certain instances, due to the facts and circumstances, the taxpayer might adopt foreign entity as the tested party. Currently the Form does not have any provision to input such information. Further, as per Note 13 “Computation for the determination of arm’s length price” the information is required to be disclosed in INR. Hence, clarity is awaited on the same.

MNE’s might need to wait for the final rules to understand if the benchmarking requirements are made mandatory in line with the global best practices, even in case the value of international transactions have not exceeded INR 1 crore.

About us

VSTN Consultancy has been honored with the Best Global Transfer Pricing Consultancy 2025 – India award at the prestigious Wealth & Finance Management Consulting Awards 2025.

Locations Served

Australia	Philippines
Belgium	Singapore
Denmark	Switzerland
India	Turkey
Italy	UAE
KSA	UK
Mexico	USA
Netherlands	Zambia

Core Team

vstn

Nithya Srinivasan

Srilakshmi Hariharan

S Ranjani

E Rajesh

Nitya Joseph

Saranya Nagarajan

Triveni Palla

9:19:52/02:24.4

centest@vetmconsultancy.com

www.vstnconsultancy.com

Our Licensed Databases

SNo	Database	Provider
1	TP Catalyst	Moody’s
2	ORBIS	Moody’s
3	Loan Module	Moody’s
4	IP & Royalty Data	Moody’s
5	Royalty Rates and Benchmark Module	ktMINE
6	Services CUT	ktMINE
7	EDF-X Bond Database	Moody’s
8	EDF-X Credit Risk Analytics	Moody’s
9	Loan Module	Royalty Range
10	Transfer Pricing Documenter (formerly Thomson Reuters Onesource)	Ryan
11	Prowess	CMIE

Whether you’re preparing for benchmarking intercompany transactions, or developing robust TP documentation, our team is here to support your international strategy and Compliance.

#TransferPricing #TransferPricingFirm#VSTNConsultancy #TaxCompliance #IndiaUAEUSA

#TPExperts#TransferPricingExperts#GlobalTransferPricingFirm

Union Budget 2026-27

The Union Budget 2026, was presented today on 01 February, 2026 . It reflects India’s bold vision of Yuva Shakthi—driving resilience, inclusivity, and global competitiveness. Key reforms target simplification, transparency, and alignment with global best practices.

The New Bill 2026 marks a significant stride in easing the compliance burden, streamlining assessment procedures and is poised to usher a simplified and more transparent transfer pricing regime.

The key changes with respect to transfer pricing include-

Simplifications and rationalisation of safe harbour rules to strengthen the IT Sector-
- Unified Category: All IT/ITeS, KPO, and IT Contract R&D services are consolidated under a single category — Information Technology Services.
- Standard mark-up: A common safe harbour markup of 15.5% applies across this unified category.
- Expanded Threshold: Eligibility limit for availing safe harbour has been significantly raised from INR 300 crore to INR 2000 crore, widening access for larger enterprises.
- Automated Approval: Applications for safe harbour in IT services will now be processed through a rule-driven automated system, eliminating the need for tax officer intervention or manual acceptance
APA Reforms
- Fast- tracking of Advance Pricing Agreement process for IT companies to 2 years with extension of 6 months at the option of the Taxpayer
- Extend the facility of modified returns available to the entity entering APA and to its associated entities also
Rationalising #penalty and prosecution
- Fast-track settlement of disputes by integrating assessment & penalty proceedings by way of a common order after providing reasonable opportunity of being heard to the taxpayer
- Immunity from penalty from underreporting in consequence of misreporting of income and prosecution on payment of 100% of tax amount as additional income-tax.
Clarifications on time limits in case of assessments
Retrospective Amendments in respect of the below
- Finance Bill, 2026 has proposed to end any ambiguity on multiple interpretations with regard to the timeline for completion of assessment by clarifying that the Time limit for assessment will be extended by the time limit available for completing the Dispute Resolution Panel (“DRP”) route (if taxpayers opt)
- In connection with the Computation of sixty days for passing the order by the Transfer Pricing Officer, it has been clarified that the date of limitation is to be included while computing the 60 days.

The above changes marks a strategic step towards streamlining the Transfer Pricing Regulations with an intent to promote a progressive and healthy tax environment to sustain economic growth and advancement.

VSTN’s detailed Analysis is presented in the attached alert.

Open Attachment…

Union Budget 2026-27

Transfer Pricing Perspective

February 2026

Background

The Finance Minister presented the Union Budget for 2026- 27 today on 01 February 2026. Driven by the spirit of Yuva Shakthi the Budget is inspired by 3 kartavyas namely- accelerating and sustaining growth, fulfilling aspirations and building the capacity of people as a pathway to prosperity, and ensuring equal opportunity—the Budget reflects a bold vision for a resilient and inclusive India.

The budget speech featured significant transfer pricing reforms designed to ease the compliance burden on taxpayers while fostering economic stability through greater tax certainty. These measures signal a decisive step toward a more predictable, transparent, and growth- friendly fiscal environment, reinforcing India’s commitment to sustainable development and global competitiveness.

The alert highlights the key changes in the Finance Bill, 2026, pertaining to Transfer Pricing provisions.

Transfer Pricing Updates

Key updates to the Safe Harbour regime

Significant updates to the safe harbour regime have been proposed with the objective of enhancing tax certainty and simplifying compliance for multinational enterprises. These changes are particularly relevant to the most prevalent and frequently litigated category of transactions – IT services, where Indian GCCs remain leading exporters.

While the Budget speech outlines key safe harbour measures, no corresponding amendments have been reflected in the Finance Bill or the accompanying memorandum. It is anticipated that the detailed notification will be issued shortly, for inclusion in the Income Tax Rules.

1. Information technology services

Particulars	Earlier provision	Budget update
Safe harbour category	4 Different buckets for Software development services, ITES services, KPO services and Contract R&D Services relating to software development	As these services are interconnected, they will be clubbed under a single category – Information technology services.
Safe Harbour Mark-ups	Ranging from 17-24%	Reduced to a common rate of 15.50%
Revenue threshold	Upto INR 300 crore	Upto INR 2000 crores
Period	To be opted every year	Once applied, the same Safe Harbour can be continued for a 5-year period, at the company’s discretion
Approval of application	Verification of application by tax authorities to confirm whether valid on a year-on-year basis	Approved by an automated rule-driven process without any need for tax officer to examine and accept the application

The threshold has been significantly increased, enabling a larger number of taxpayers to opt for the regime and achieve greater tax certainty. In addition, the safe harbour rate has been reduced for the first time in many years, enhancing the overall attractiveness of the scheme. The consolidation of SwD, ITES, KPO, and Contract R&D into a single category of IT services’ is another positive development, as it eliminates any confusion in classifying similar service offerings across multiple buckets which was also a matter of dispute in various cases(e.g BPO/KPO) Automating the approval of safe harbour applications will also reduce approval timelines and eliminate the risk of bias during tax authority examinations. Overall, these changes will be particularly beneficial to captive centres operating in India, many of which have faced persistent tax disputes despite maintaining margins in the range of 15 – 16% on cost.

ii. Foreign Cloud Service Providers

To strengthen India’s critical infrastructure and attract global investment in data centres, a tax holiday until 2047 has been proposed in the Budget. This benefit will apply to foreign companies offering cloud services globally, provided they utilize data centre services provided from India. However, such companies must deliver services to Indian customers via an Indian reseller entity.

In cases where the data centre service provider in India is a related party, a specific safe harbour margin of 15% on cost is proposed, which has a slightly better expected mark- ups as compared to the new rates of 15.50% for IT services.

1. Safe harbour to non-residents for component warehousing in bonded warehouses

To enhance just- in- time logistics in electronic manufacturing, a safe harbour framework has been introduced for non- residents for component warehousing in bonded warehouses. Safe harbour for warehousing components will be available at a profit margin of 2% of invoice value, resulting in an effective tax of approximately 0.7% – lower than rates in competing jurisdictions. This provision could help avoid disputes in connection with profit attribution relating to warehousing activities.

iv. Accountant definition

To support the government’s vision of home- grown accounting and advisory firms to become global leaders, the definition of Accountant for the purposes of Safe Harbour Rules will also be rationalised. Currently the definition of Accountant is relied in the Rules only in connection with the management services safe harbor for certification of the cost pool. Under this it provides a preference to Global firms for the certification as it requires the firm certifying the same to be present in more than 2 countries. However, more information on this is awaited in this regard.

Advance Pricing Agreement (APA)

i. Extension of modified return facility for Associated Enterprises

Budget 2026 rationalises the APA framework by amending section 169 of the Income- tax Act, 2025, corresponding to section 92CD of the Income- tax Act, 1961, to extend the modified return facility beyond the APA applicant to the impacted Associated Enterprise (AE).

While the earlier provision allowed only the APA signatory to file a modified return, the amended section now enables both parties to file a return or modified return, within three months of entering into the APA and limited strictly to the agreement.

This change fills a critical procedural gap by allowing AEs to give effect to corresponding income adjustments and claim refunds of excess tax or TDS, which was not possible earlier. The impact is expected to be particularly significant in cases involving royalty and fees for technical services (FTS), where AEs often suffer withholding tax upfront and were unable to seek refunds despite downward adjustments under APAs for the Indian entity.

Overall, the amendment ensures tax symmetry, improved cash- flow efficiency, and smoother implementation of APA outcomes for multinational groups.

ii. Fast-tracking of Unilateral APAs for IT services

For companies engaged in Information technology service, a fast- track Unilateral APA process is proposed, with an objective to conclude such APAs within two years, extendable by six months on the taxpayer’s request. The timeline of 2 years resonates with the median time period of APA conclusions as indicated in OECD peer review and thereby it is visibly seen that Indian APA program is marching towards aligning with Global best practices starting off with the IT Industry.

In spite of being a successful programme for achieving tax certainty, significant delay in concluding the APA cases pose major challenges to the taxpayer in the form of facing continued TP adjustments till

conclusion, handling litigation simultaneously during the APA tenure, etc., While detail implementation guidance is awaited, this a welcome move towards prevention of probable backlogs of APA cases.

Clarifications on time limits in case of assessments

Considering the judgments of the various courts on interpreting the timelines of assessments, the Finance Bill, 2026 has proposed following amendments to end any scope for multiple interpretations:

Particulars	Existing provisions	Reason for amendment	Amendment	Effect
Computation of sixty days for passing the order by the Transfer Pricing Officer	As per section 92CA(3A), the TPO may pass the order at any time 60 days prior to the expiry of the limitation period prescribed under section 153 or section 153B for completion of assessment or reassessment.	Courts excluded the date of limitation while computing the 60 days resulting in annulment of multiple assessments¹	It has been clarified that the date of limitation is to be included while computing the 60 days. This clarification shall come into force with retrospective effect from June 1st, 2007 in case of old Act and corresponding amendment is made in New Act which is effective from 1 April 2026.	Old Act: Due dates for issuance of TP Order are 30 Jan (non-leap year)/ 31 January (leap year)/ 1 November (where limitation of assessment expires on 31 December) New Act: Due date for issuance of TP order is one month prior to the month in which the period of limitation expires, i.e., 31 January/ 31 October.
Clarification on time-limit for completion of assessment under section 144C	Section 153 provides a time limit for completion of assessment, reassessment, and recomputation. Section 153B provides time limit for completion of assessment in search cases. Notwithstanding anything contained in section 153 or section	In various judgements, courts have taken a view that the entire process of section 144C has to satisfy the overall time limit	notwithstanding the time limit provided in section 153 and section 153B, it is proposed to clarify in section 153 and section 153B that timelines in these sections govern the draft order stage and the timelines provided in section 144C operate for finalization of assessments.	The time available for completing the assessment by the Assessing Officer post ITATV CIT(A)/ is extended by the time limit available for completing the proceedings under the Dispute Resolution Panel (“DRP”) route (if taxpayers opt).

2 Hon’ble Supreme Court in the case of Shelf Drilling Ron Tappmeyer Ltd. Appeal arising out of SLP (C) Nos. 20569-72/2023 and SLP(C) No. 25798/2024 and Writ Petition No.2340 Of 2021 Hon’ble High Court of Madras in the case of Commissioner of Income-tax Vs. Roca Bathroom Products (P.) Ltd. [2022] 445 537 (Madras)

1. Failure to furnish TP Accountant’s Report (Form No. 3CEB)

Section 447 provided for a penalty of ¥ 1,000,000 for failure to furnish report under section 172 of the Act (i.e. Form 3CEB) within the due date. In the Union budget certain penalties have been reclassified and officially termed as fees’. In line with the same, the existing penalty has been removed, and new section 428 (4) has been introduced wherein it is proposed to charge a graded fee of ¥ 50,000 and ¥ 1,000,000 depending on the period of delay.

ii. Imposition of Interest for under-reporting or misreporting of income within Assessment Order

Under the existing provisions i.e. Sec 274 of the Income Tax Act, 1961, penalty procedures are required to be initiated separately, and penalty cannot be levied without providing the assessee an opportunity of being heard for. With an intention to promote consistency and integrate the assessment- penalty framework, it is now proposed that a single combined order for both assessment and penalty for underreporting and mis- reporting of income can be issued which has been provided for in Section 439(11) of the Income Tax Act, 2025. At this juncture it raises a critical concern amongst the taxpayers as to whether the levy of penalty proceedings, which was under the discretion of the Assessing officer earlier, is being made automatic vide this amendment.

Further, it is proposed that interest on pending/ additional demand (u/s 220 of 1961 Act) can be charged only after the order is passed by CIT(A) or ITAT (for appeal against DRP orders). This amendment is applicable from 1st March of 2026 on any draft assessment order or reassessment made after 1st April 2027.

iii. Expansion of Immunity from penalty in case of under-reporting or mis-reporting of income

Section 440 of the Income- tax Act, 2025 expands immunity from penalty (Section 439) and prosecution ( Section 478 and 479) to misreporting cases, subject to payment of additional tax, thereby promoting early dispute resolution and reducing litigation.

Earlier, immunity under section 440 was available only in cases of under- reporting of income, and not in cases where under- reporting arose due to misreporting. It is now proposed to extend immunity to cases of misreporting, provided the assessee pays additional tax equal to 100% of tax payable on such misreported income, in lieu of penalty. This amendment will take effect from the 1st day of March, 2026 for Assessment Year 2026- 27 (Previous Year 2025- 26) or any earlier Assessment years.

The provision of immunity is subject to the following conditions:

Tax and interest as per the assessment order are paid within the prescribed time, and No appeal is filed against the assessment order.
The assessee must apply for immunity within one month from the end of the month in which the assessment order is received, and the Assessing Officer must pass an order within three months from receipt of the application.

1. Rationalization of prosecution proceedings

Rigorous imprisonment of up to 7 years for tax- related offences has been decriminalized. Maximum imprisonment reduced from 7 years to 2 years (first offence) & 3 years (subsequent offences). Graded punishments have been prescribed based on the amount of tax involved. Imposition of fines alone where tax evasion does not exceed 10 lakh. Fine introduced in lieu of or in addition to imprisonment.

v. Payment of demand for seeking stay

Pre- deposit requirement is reduced from 20% to 10% , to be computed only on the core tax demand, detailed implementation guidance is awaited

Our Thoughts

The New Bill marks a significant stride in easing the compliance burden, streamlining assessment procedures, and aligning India’s transfer pricing framework with global best practices. These amendments are poised to usher a simplified and more transparent transfer pricing environment. Further, certain notable amendments targetting specific industry / business, such as changes to Safe harbor rules and APA program benefitting the IT companies, lead the country into a positive growth trajectory. India being a hub for GCC, these amendments directed towards IT companies will evidently present a vibrant climate for GCCs.

The Government’s intent to ease compliance is reflected in the Hble Finance Minister’s budget speech highlighting that the simplified Income Tax Rules and Forms will be notified shortly that can be easily comprehended by ordinary citizens as well without difficulty. Further it is expected that the Simplified rules to be notified will remove the anomalies and amquities surrounding the new Income Tax Act, 2025 for instance with respect to clarity on definition of “Control” and “Management” with respect to Associated Enterprises .

That said, expectations around the introduction of Pillar Two regulations remained high. India appears to be adopting a cautious “wait- and- watch” approach, yet Indian- headquartered multinationals cannot afford complacency. With filing requirements under Pillar Two commencing in several jurisdictions this year, proactive preparedness is essential. Organizations must anticipate cross- border obligations, strengthen internal processes, and ensure readiness to meet evolving global compliance standards.

About us

VSTN Consultancy has been honored with the Best Global Transfer Pricing Consultancy 2025 – India award at the prestigious Wealth & Finance Management Consulting Awards 2025.

Locations Served

Australia	Philippines
Belgium	Singapore
Denmark	Switzerland
India	Turkey
Italy	UAE
KSA	UK
Mexico	USA
Netherlands	Zambia

Core Team

vstn

Nithya Srinivasan

Srilakshmi Hariharan

S Ranjani

E Rajesh

Nitya Joseph

Saranya Nagarajan

Triveni Palla

9:19:52/02:24.4

centest@vetmconsultancy.com

www.vstnconsultancy.com

Our Licensed Databases

SNo	Database	Provider
1	TP Catalyst	Moody’s
2	ORBIS	Moody’s
3	Loan Module	Moody’s
4	IP & Royalty Data	Moody’s
5	Royalty Rates and Benchmark Module	ktMINE
6	Services CUT	ktMINE
7	EDF-X Bond Database	Moody’s
8	EDF-X Credit Risk Analytics	Moody’s
9	Loan Module	Royalty Range
10	Transfer Pricing Documenter (formerly Thomson Reuters Onesource)	Ryan
11	Prowess	CMIE

Whether you’re preparing for benchmarking intercompany transactions, or developing robust TP documentation, our team is here to support your international strategy and Compliance.

#TransferPricing #TransferPricingFirm#VSTNConsultancy #TaxCompliance #IndiaUAEUSA

#TPExperts#TransferPricingExperts#GlobalTransferPricingFirm

Prelude – Singapore Pillar Two

IRAS Introduces Mandatory MNE Registration Under Pillar Two

In connection with Pillar Two GloBE rules, Inland Revenue Authority of Singapore (IRAS) introduced mandatory registration for MNE groups which meets the applicability criteria.

MNE groups are required to register within 6 months from the end of the parent entity’s accounting year when Pillar Two is first applicable – for years starting on or after 1st January 2025.

For companies following Calendar year the due date would be following 30th June
For companies following April – March accounting year the due date would be following 30th September

IRAS has announced that online submissions would be available from May 2026.

However the IRAS has released the Registration form (https://form.gov.sg/6948f8f3c3073fe8f5417989) and instructed not to submit the form before the registrations process commences.

Key point to note is a surcharge of 10% would be levied where the MNE Group fails to discharge its registration liability.

Our detailed alert covering the notification from IRAS is enclosed.

With Pillar Two compliance being complex, business will have to evaluate GloBE rules and its corresponding Tax liability, and evaluate if all its entities, branches in Singapore come under the ambit of the pillar two rules. This will require holistic understanding of the Pillar two rules before the registration stage itself.

Open Attachment…

Singapore Pillar Two Registration Process January 2026

Summary

In October 2024, The Parliament of Singapore passed the Multinational Enterprise (Minimum Tax) Act,2024 (MMT Act). The provisions of the act are applicable from the financial year starting on or after 1^st January 2025. The MMT Act requires MNE groups that meet the applicability criteria to register the group.

In line with the above requirements, The Inland Revenue Authority of Singapore (IRAS”) has released the draft registration form and process for submitting the form’. Registration is expected to start from May 2026. Failure to register may result in a 10% surcharge on any applicable tax payable under the MMT Act.

The Ultimate Parent Entity can appoint a subsidiary or a local tax agent to act as its representative. Registration requires disclosure of all entities operating in Singapore and their classification in accordance with the MMT Act. The details on the applicability and contents of the registration form are provided below.

Applicability

1. Introduction

The OECD/G20 Inclusive Framework introduced measures to limit base erosion and prevent large multinational enterprises (MNEs) from shifting profits to low- tax jurisdictions, through BEPS Action Plans. As a continuum of this initiative, Pillar Two rules were introduced, aiming at minimum effective tax rate of 15% in each jurisdiction.

As part of Inclusive Framework, Singapore has enacted the Multinational Enterprise (Minimum Tax) Act 2024 (MMT Act), This Act introduced two key provisions:

Multinational Enterprise Top- Up Tax (MTT) – the local implementation of the Income Inclusion Rule (IIR) under Pillar 2.
Domestic Top- Up Tax (DTT) – Singapore’s equivalent of the Qualified Domestic Minimum Top- Up Tax (QDMTT).

Under the MMT Act, an MNE group is considered in- scope if it meets both of the following criteria:

The group has an annual consolidated revenue of €750 million or more for its Ultimate Parent Entity (UPE) in at least two of the four preceding financial years.
The group has at least one Constituent Entity (CE) or Joint Venture located in Singapore, or at least one Reverse Hybrid Entity that is incorporated or registered in Singapore.

These rules ensure that Singapore- based entities within large MNE groups comply with global minimum tax standards while maintaining alignment with the OECD/G20 Pillar 2 framework.

2. Registration Requirement

The UPE of an in- scope MNE group must register for the MMT Act within six months after the end of the first financial year to which the Act applies. The online registration form will be available from May 2026. For UPEs with a calendar year 2025 as their accounting year, the registration deadline is 30 June 2026. For UPEs with a financial year ending March 2026, the registration deadline is 30 September 2026.

UPE can designate a local Constituent Entity or appoint a local tax agent to register the group. A letter of Authorization, explicitly authorizing the representative to act on behalf of UPE, must be attached with the registration form.

Additionally, the UPE must designate a single Singapore CE as the Designated Local DTT filling entity as well as GloBE Information Return (GIR) filing entity.

If the MNE group only has excluded entities operating in Singapore, registration is not required, provided these entities are correctly treated as excluded entities in the GIR.

In the event of errors discovered after submission, IRAS recommends not re- submitting the form. Instead, the UPE should notify IRAS by email with the subject title as “Correction to Registration From <acknowledgment number of the original submission>, along with group/UPE name, UPE TIN, details of the incorrect entries, and the required amendments.

3. Information Required for Registration

The following are the details to be included in the registration form.

Particulars	Information Required
Part I: General Information	1. Name of MNE Group 2. First year for which IIR/UTR was applicable in any jurisdiction. 3. First year in which MMT act is applicable 4. Details of UPE – Name, Jurisdiction, TIN 5. Whether MNE Group a Multi parent group? 6. Whether Deemed consolidation Test 3 is applicable to the MNE group?
7. Type of Financial year end adopted by MNE – 12 month or 52/53 week?

Particulars	Information Required
Part II: Multinational Top Up Tax (MTT) [equivalent to IIR]	7. Type of Financial year end adopted by MNE – 12 month or 52/53 week? An MNE Group is required to register for MTT in Singapore if it has a parent entity located in Singapore that meets the definition of a Responsible Member under the MMT Act. Where registration is required, the Tax Identification Number (TIN) of the Responsible Entity and the status of the Parent Entity should be provided. Where registration is not required, the reasons for non-registration should be clearly stated. Note: For multi-parent groups, All Parent entities should be disclosed.
	Part III: Domestic Top up Tax (DTT) [equivalent to QDMTT] A. Designated Filing Entity (DFE): TIN, Name, and contact details of DFE personnel. This entity will have to file the DTT Tax Return and the GIR Return/ notification. B. In Scope Entities: The TIN, entity status and parent entity status of all entities incorporated, registered or located in Singapore 4 C. Excluded Entities: The TIN and Type of Exclusion of all Entities incorporated, Registered or located in Singapore.4
	Part IV: GIR Information Will GIR be filed with IRAS or with a competent authority in another jurisdiction that has an information exchange agreement with Singapore
Part V: Change in Tax Residency	TIN, Current Jurisdiction and date of change of tax residency of entities changing tax residency away from Singapore after 30 Nov 2021
Part VI: Declaration	1. Name, designation and contact details of Authorized Person of UPE submitting the form 2. If authorized Person is a representative, Letter of authorization & Representative’s Organization

In the end IRAS requires the Ultimate Parent Entity (“UPE”) to declare that the information provided in the registration form is true and complete. Penalties are attracted for an incorrect declaration.

Where errors are identified after submission, the registration form should not be re- submitted. Instead, UPE is required to notify IRAS by email.

Post Registration

IRAS will acknowledge receipt by email and typically process within ~1 month (longer if information is incomplete). Upon approval, letters will be sent to Singapore- located CEs/JVs/JV- subs/excluded entities and reverse hybrids, and to responsible members for MTT (if applicable).

Non-compliance Consequence

A 10% surcharge on DTT and MTT (if applicable) may be imposed if an in- scope MNE group fails to notify its registration liability under the MMT Act.

Conclusion

Currently over 55 jurisdictions have implemented Pillar Two rules in their tax laws, including traction among several other jurisdictions w.r.t. implementation of GloBE rules. In several mature tax jurisdictions, effective financial year for which Pillar Two is effective has concluded and the timelines for various compliances w.r.t. GloBE rules would fall in 2026.

In Singapore, the IRAS has notified the Registration requirement for applicable MNE Groups. Registration requires information to be provided about the MNE group including details of the UPE, CEs, designated filing entity. This registration should not be viewed simply as a simple form filling exercise. Rather, it would require wholistic understanding of the impact of GloBE rules on the Group, to correctly provide information in the registration form. Further, as there is surcharge on non- compliance of registration, MNE Group would have to be Pillar Two ready.

How VSTN can support

VSTN offers support on Pillar Two including:

Impact & readiness assessments: Scoping, safe harbour eligibility, and jurisdictional ETR modelling
Technical interpretation & advisory: GloBE income, covered taxes, deferred tax adjustments, QDMTT design, quantifying top- up tax liability and alignment with transfer pricing, CbCR and overall tax strategy.
Data, systems, and process support: Data gap analysis, calculation models and updating accounting and reporting systems.
Compliance and reporting assistance: GloBE calculations, GIR / QDMTT returns and related disclosures in financial statements.
Governance, audit, and controversy support: Documentation and internal controls
Ongoing regulatory monitoring: Tracking OECD guidance and local law developments and assessing client- specific impact.

About us

VSTN Consultancy has been honored with the Best Global Transfer Pricing Consultancy 2025 – India award at the prestigious Wealth & Finance Management Consulting Awards 2025.

Locations Served

Australia	Philippines
Belgium	Singapore
Denmark	Switzerland
India	Turkey
Italy	UAE
KSA	UK
Mexico	USA
Netherlands	Zambia

Core Team

vstn

Nithya Srinivasan

Srilakshmi Hariharan

S Ranjani

E Rajesh

Nitya Joseph

Saranya Nagarajan

Triveni Palla

9:19:52/02:24.4

centest@vetmconsultancy.com

www.vstnconsultancy.com

Our Licensed Databases

SNo	Database	Provider
1	TP Catalyst	Moody’s
2	ORBIS	Moody’s
3	Loan Module	Moody’s
4	IP & Royalty Data	Moody’s
5	Royalty Rates and Benchmark Module	ktMINE
6	Services CUT	ktMINE
7	EDF-X Bond Database	Moody’s
8	EDF-X Credit Risk Analytics	Moody’s
9	Loan Module	Royalty Range
10	Transfer Pricing Documenter (formerly Thomson Reuters Onesource)	Ryan
11	Prowess	CMIE

Whether you’re preparing for benchmarking intercompany transactions, or developing robust TP documentation, our team is here to support your international strategy and Compliance.

#TransferPricing #TransferPricingFirm#VSTNConsultancy #TaxCompliance #IndiaUAEUSA

#TPExperts#TransferPricingExperts#GlobalTransferPricingFirm

The Netflix Ruling

The Netflix Ruling – Unravelling the Digital Distribution Conundrum

VSTN’s recent article on “The Netflix Ruling – Unravelling the Digital distribution conundrum” co-authored by Nithya Srinivasan and CA Ranjani S with inputs from Ayush Agrawal was published in the CASC Monthly Bulletin for January 2026.

The article discusses the landmark ruling of the Hon’ble Mumbai Bench of the Income Tax Appellate Tribunal (ITAT) in the case of Netflix Entertainment Services India LLP, offering clarity on the transfer pricing treatment of digital and platform-based businesses. The ruling critically discusses on the method selection, functional reality over assumptions through alignment of the taxpayer’s FAR profile with its actual conduct, profiling of unique assets i.e., Open Connect Appliances (‘OCAs’), etc., In a nutshell, this ruling reiterates that contractual and functional realities must prevail over speculative tax presumptions in the digital economy.

Open Attachment…

THE NETFLIX RULING – UNRAVELLING THE
DIGITAL DISTRIBUTION CONUNDRUM

A. Introduction

The Hon’ble Mumbai Bench of the Income Tax Appellate Tribunal (ITAT/the Tribunal) has delivered a pivotal ruling in Netflix Entertainment Services India LLP¹, which throws light on the transfer pricing treatment of digital/platform- based businesses. The epicentre of the ruling is about the functional characterisation of Netflix India wherein the Tribunal evaluated the facts and circumstances of the taxpayer through the transfer pricing lens and beyond the superficial economic reconstruction portrayed by the tax authorities.

The Tribunal critically examined various key aspects such as the selection and application of the Most Appropriate Method (TNMM vs. “Other Method”), the scope of recharacterization under Indian TP rules, and the interpretation of intellectual property rights and Development, Enhancement, Maintenance, Protection, Exploitation (“DEMPE”) functions in the context of digital streaming models.

MS.NITHYA SRINIVASAN CA. S. RANJANI

B. Background

Overview

Netflix Inc. (“Netflix US”) is the owner of Netflix platform offering video on- demand globally and it offered official distribution rights to Netflix International B.V. (“NIBV”), a Netherlands- based affiliate, which managed non- U.S. territories until December 2020.

Netflix India was incorporated in April 2017 to distribute access to the global Netflix Service in India under a non- exclusive Distribution Agreement, initially with Netflix international B.V. (effective September 2017) and, from January 2021, directly with Netflix US. Under this agreement. Netflix India was authorised to promote subscriptions, invoice customers, collect subscription fees, and provide limited customer support, while all intellectual property rights including content, technology, and trademarks, remained exclusively with Netflix US/NIBV.

Factual matrix

Characterisation	Limited risk distributor of access to Netflix Service
Remuneration model	Subscription revenue net of local costs plus a fixed return on sales
International transaction	Payment of distribution fee to AE
Most Appropriate Method (“MAM”)	Transactional Net Margin Method (“TNMM”) ; PLI – OP/OR
Margin earned	1.36% on sales
Arm’s length margin range	Unadjusted margins = 1.88% to 2.33% Post working capital adjustment= 0.77% to 1.47%

Further Netflix India does not own or develop any intangible assets, nor does it perform DEMPE functions. Its tangible assets comprise routine office equipment and certain Open Connect Appliances (OCAs), which are cache servers deployed at ISP nodes to optimize streaming efficiency akin to logistical tools rather than core technology assets.

This structural model, based on cost- plus remuneration and risk insulation, formed the basis of Netflix India’s transfer pricing position, which became the focal point of debate.

Intercompany Arrangements

The following intercompany arrangements governed Netflix India’s operations:

Arrangement	Description & Pricing Policy
Distribution Agreement	• Netflix India appointed as a non-exclusive distributor of access to the Netflix Service in India. • Authorized to promote subscriptions, invoice customers, and provide limited customer support. • Remunerated on a cost-plus basis, ensuring a fixed return on sales (ROS) after reimbursement of all local costs.
Terms of Use with Subscribers	• Formalized Netflix India’s role in contracting with Indian subscribers. • Subscribers granted only a limited, non-exclusive right to access content; all IP rights retained by Netflix US/NIBV.
Marketing Support & Compliance	• Netflix India undertook localized marketing campaigns and regulatory compliance. • Activities executed under global guidelines and budgetary approvals from AEs

Transfer pricing scrutiny

i. Transfer Pricing Officer

The Transfer Pricing Officer (TPO), however, challenged both the characterization and the benchmarking approach, asserting that:

Netflix India was not a mere distributor but an entrepreneurial provider of content and technology, bearing significant risks and performing high-value functions.
The TNMM was “unscientific” and unsuitable for the complex OTT streaming model; instead, the TPO invoked the “Other Method” under Rule 10AB, imputing a royalty-based approach
By sourcing six unrelated royalty agreements from the RoyaltyStat database, the TPO computed an arm’s-length royalty rate of 57.12% of revenue, resulting in a transfer pricing adjustment of 1 444.93 crore.

ii. DRP Approach

The DRP substantially endorsed the TPOs position, which was premised on recharacterizing Netflix India from a limited- risk distributor to a full- fledged entrepreneurial operator in the Indian market. The key findings of the DRP are as below:

Functional Recharacterization
Netflix India undertook a “plethora of functions” beyond mere distribution of access. It enumerated fifteen activities, including entering into user agreements, promoting the Netflix Service, issuing gift subscriptions, providing infrastructure support, etc., Ownership of OCAs was viewed as evidence of investment risk, elevating Netflix India’s profile to that of a significant technological and operational hub rather than a routine distributor.

Rejection of TNMM and Assessee’s Comparables

Dismissed TNMM adopted by the assessee as “unscientific, misdirected, and incompatible” with the business model and criticized use of software distributors as comparables. It also rejected asset- intensity and marketing- intensity adjustments furnished by the assessee, terming them baseless.

Endorsement of Royalty-Based ‘Other Method’

The Panel reasoned that Royalty based approach better reflected the economic substance of Netflix India’s operations and thereby affirmed TPO’s invocation of Rule 10AB and upheld adoption of “Other Method” as MAM. It endorsed benchmarking based on six unrelated royalty agreements sourced from the RoyaltyStat database, three for content rights and three for technology platform rights, resulting in a blended royalty rate of 57.12% of revenue.

Introduction of Ad-hoc Attribution Model

Devised an alternative attribution grid, allocating arbitrary percentages to functional clusters (e.g., content storage 5% , marketing 5% , technology 5% ) and concluded that 43% of revenue should be attributed to Netflix India.

C. Key Disputes

At the outset, the key disputes emanating from the ruling are:

Netflix India’s characterization – Limited-risk distributor Vs an entrepreneurial content-and-technology provider?
MAM – TNMM Vs Other Method based on royalty rates under Rule 10AB?
Remuneration – Distribution fee Vs. Royalty?
Ownership of Open Connect Appliances ((OCAs) – Logical tools Vs. Deployment of significant technological asset?
Whether the comparables selected by Netflix India (software and product distributors) were functionally appropriate?

D. Analysis and Tribunal’s Standpoint

The Tribunal undertook a detailed review of Netflix India’s functional profile, contractual framework, and transfer pricing methodology vis-à- vis Indian TP regulations.

A quick glance at the key disputes and the Tribunal’s position is provided below:

Key Dispute	Tribunal’s Contention
Functional characterization of Netflix India	• Netflix India performs routine distribution and marketing-support functions under strict supervision of AEs. • Owns no IP and undertakes no DEMPE functions, risk profile remains limited. • Opined – functional reality, not perceived commercial importance determines characterization.
Method selection (TNMM vs. Other Method)	• Affirmed TNMM as the MAM under Rule 10B. • Rejected royalty-based “Other Method” as arbitrary. • Benchmarking hypothetical transaction was impermissible under law • Found no transfer or license of content or technology; Netflix India merely facilitates access. • Payments cannot be treated as royalty under section 9(1)(vi) or treaties – placed reliance on SC judgement on Engineering Analysis Centre of Excellence • Netflix India’s small employee headcount evidenced routine functions and returns
IP ownership and royalty characterization	(Covered above)
Treatment of OCAs and infrastructure	• OCAs are logistical cache devices, not core technology assets. To equate such caching devices with core technological assets is to mistake warehousing for authorship,” the Tribunal remarked, rejecting the Revenue’s characterization.
Comparables selection / rejection	• Accepted software distributors as valid analogues for benchmarking distribution of intangible access rights. • Criticized DRP for ignoring adjusted margins and adopting ad-hoc attribution without statutory basis.

Final outcome

Netflix is a limited risk distributor
TNMM upheld as MAM
Royalty-based approach rejected and DRP’s ad-hoc attribution model rejected as legally unsustainable and economically flawed
Entire TP adjustment of 1 444.93 crore deleted

In essence, the ruling reaffirms that contractual and functional realities must prevail over speculative recharacterization, and that TNMM remains the most reliable method for routine distribution models in the digital economy.

E. Key learnings / takeaways

This decision sheds light on fundamental principles such as method selection, comparability standards and the treatment of digital infrastructure assets and is expected to shape the approach toward benchmarking transactions in the OTT, SaaS, and e- commerce sectors globally.

It vehemently underpins that the tax authorities cannot attempt to paint genuine intercompany arrangements as sham, especially in digital businesses, by imputing royalty or entrepreneurial returns. While the Tribunal’s conclusions are firmly grounded in Indian transfer pricing regulations and judicial precedents,

the case also offers an opportunity to reflect on its interplay with global transfer pricing framework. A snapshot of the key learnings is provided below:

Need for robust documentation

Robust documents such as intercompany agreements anchored the Tribunal’s analysis. The Distribution Agreement explicitly appointed Netflix India as a non exclusive distributor of access and reserved all IP rights (content, technology, trademarks) to NIBV/Netflix US, which the Tribunal treated as decisive on functional characterization. The Terms of Use with subscribers mirrored this, granting only a limited, non exclusive right to access and view content, not any ownership or exploitation rights. Hence this ruling is a testament that clear drafting of contracts capturing the rights and duties of the parties, IP ownership, etc., are essential.

Recharacterization of business profile

This ruling has poised a notable point that recharacterization cannot be done by the authorities on a customary basis. If the taxpayer is able to demonstrate the alignment of conduct of parties with the underlying contract with concrete evidence it would ringfence the taxpayer from such recharacterization

Across jurisdictions, taxpayers operate through various business models and a thorough understanding of the business dynamics is essential in order to determine the remuneration model. In recent times sizeable number of entities in India are operating in SaaS / digital environment. While India being the second largest eco- system for start- up enterprises, thorough understanding of their complex business structure and suitable billing model i.e., whether it warrants a royalty- based approach or it is a mere distribution model expecting a routine return, etc., acts as a prerequisite.

Asset profiling

In determining the characterisation of a taxpayer and the resultant remuneration model, apart from the functional analysis, the presence and deployment of asset play a pivotal role. In the present case, the assets in the form of OCAs deployed by Netflix India are considered to be integral part of offering seamless Netflix streaming service to the customers whereas Tribunal had pondered over the quantum of assets employed by Netflix India vis- à- vis the AE. While the quantum of assets may not be significant, however one must evaluate the impact, it has on the revenue model of the taxpayer, due to the absence of such assets and accordingly the weightage to be determined.

Importance of DEMPE

The Tribunal has deliberated on the importance of DEMPE analysis as it is relevant to understand the transaction from the perspective of value creation. Hence while structuring IP related transaction, one needs to perform DEMPE analysis as a part of the functional profiling of the taxpayer.

Bottom Line

This ruling emphasises a noteworthy aspect that the law does not permit tax authorities to take shelter under the name of complex business models to recharacterize transactions. The Tribunal’s approach by relying on contractual arrangements, the FAR profile, and the binding judicial precedents (i.e., Supreme court ruling on Engineering Analysis), reiterates the importance of maintaining robust documentation by the taxpayers.

The Tribunal reaffirmed that contractual terms and the actual FAR profile govern transfer pricing outcomes under the transfer pricing regulations. By upholding TNMM and rejecting royalty- based and ad- hoc attribution approaches, the ruling underscores that complex business models cannot justify arbitrary recharacterization.

(Inputs contributed by Ayush Agrawal – Assistant Manager at VSTN Consultancy Private Limited.

The authors are part of VSTN Consultancy Private Limited, Transfer Pricing boutique firm and can be reached at snithya@vstnconsultancy.com, ranjani@vstnconsultancy.com and ayusha@vstnconsultancy.com)

About us

VSTN Consultancy has been honored with the Best Global Transfer Pricing Consultancy 2025 – India award at the prestigious Wealth & Finance Management Consulting Awards 2025.

Locations Served

Australia	Philippines
Belgium	Singapore
Denmark	Switzerland
India	Turkey
Italy	UAE
KSA	UK
Mexico	USA
Netherlands	Zambia

Core Team

vstn

Nithya Srinivasan

Srilakshmi Hariharan

S Ranjani

E Rajesh

Nitya Joseph

Saranya Nagarajan

Triveni Palla

9:19:52/02:24.4

centest@vetmconsultancy.com

www.vstnconsultancy.com

Our Licensed Databases

SNo	Database	Provider
1	TP Catalyst	Moody’s
2	ORBIS	Moody’s
3	Loan Module	Moody’s
4	IP & Royalty Data	Moody’s
5	Royalty Rates and Benchmark Module	ktMINE
6	Services CUT	ktMINE
7	EDF-X Bond Database	Moody’s
8	EDF-X Credit Risk Analytics	Moody’s
9	Loan Module	Royalty Range
10	Transfer Pricing Documenter (formerly Thomson Reuters Onesource)	Ryan
11	Prowess	CMIE

Whether you’re preparing for benchmarking intercompany transactions, or developing robust TP documentation, our team is here to support your international strategy and Compliance.

#TransferPricing #TransferPricingFirm#VSTNConsultancy #TaxCompliance #IndiaUAEUSA

#TPExperts#TransferPricingExperts#GlobalTransferPricingFirm

Tax Connect Newsletter – UAE Transfer Pricing

Tax Connect Newsletter – UAE Transfer Pricing – Transfer Pricing in the New Global Tax Era

The global tax environment is undergoing a paradigm shift with the implementation of OECD’s Pillar Two framework and the increasing relevance of Advance Pricing Agreements (APAs).

In VSTN’s latest article, Transfer Pricing in the New Global Tax Era, published in the second edition newsletter of the Taxation Society UAE, we have analysed how these developments intersect with the UAE’s evolving tax regime.

Key Highlights:

What does APA implementation mean to UAE enterprises operating in an increasingly complex environment
The implications of Pillar Two for multinationals with operations in UAE considering the applicability of Pillar 2 effective 1st January 2025 in UAE
Practical insights/Key Takeaways for MNEs preparing for compliance in UAE.

The UAE’s proactive approach to aligning with international tax standards marks a significant milestone, and this article seeks to provide clarity to MNE’s on how transfer pricing frameworks are adapting to the new global tax architecture.

Do reach out to VSTN for any support on Transfer pricing

Open Attachment…

About us

VSTN Consultancy has been honored with the Best Global Transfer Pricing Consultancy 2025 – India award at the prestigious Wealth & Finance Management Consulting Awards 2025.

Locations Served

Australia	Philippines
Belgium	Singapore
Denmark	Switzerland
India	Turkey
Italy	UAE
KSA	UK
Mexico	USA
Netherlands	Zambia

Core Team

vstn

Nithya Srinivasan

Srilakshmi Hariharan

S Ranjani

E Rajesh

Nitya Joseph

Saranya Nagarajan

Triveni Palla

9:19:52/02:24.4

centest@vetmconsultancy.com

www.vstnconsultancy.com

Our Licensed Databases

SNo	Database	Provider
1	TP Catalyst	Moody’s
2	ORBIS	Moody’s
3	Loan Module	Moody’s
4	IP & Royalty Data	Moody’s
5	Royalty Rates and Benchmark Module	ktMINE
6	Services CUT	ktMINE
7	EDF-X Bond Database	Moody’s
8	EDF-X Credit Risk Analytics	Moody’s
9	Loan Module	Royalty Range
10	Transfer Pricing Documenter (formerly Thomson Reuters Onesource)	Ryan
11	Prowess	CMIE

Whether you’re preparing for benchmarking intercompany transactions, or developing robust TP documentation, our team is here to support your international strategy and Compliance.

#TransferPricing #TransferPricingFirm#VSTNConsultancy #TaxCompliance #IndiaUAEUSA

#TPExperts#TransferPricingExperts#GlobalTransferPricingFirm

UAE FTA – APA Guide

The FTA has released the much-awaited UAE APA guide on 31 December 2025. The guide provides comprehensive insights into the APA programme including procedures, monitoring and review mechanisms and will support taxpayers in making an informed decision on opting for the APA scheme.

Key Highlights:

Eligibility: a) Cross border or b) Domestic Controlled transactions (where subject to different tax rates or eligible for tax incentives). Controlled transactions falling under safe harbour provisions cannot be covered
Threshold: Controlled Transactions of AED 100 mn per year (At FTA’s discretion, applications not meeting the threshold can also be accepted)
Term: 3-5 years, rollback not yet prescribed
Phased rollout: UAPA initially, BAPA & MAPA to be announced subsequently
Acceptance of applications: UAPAs for domestic transactions from December 2025, for cross border transactions to be announced
Application timelines: Earlier of 2 months (mentioned as 40 days in another section) from the date of pre-filing approval, or 12 months prior to commencement of the first Tax Period to be covered
APA filing fees: AED 30,000 for fresh applications (inclusive of amendments), AED 15,000 for renewals

Our observations:

Pre-filing consultations are mandatory, and APA applications can be filed only on approval of the pre-filing request, highlighting the importance of clear communication with the FTA from the outset. Pre filing consultations require taxpayers to address multiple aspects with the FTA to reduce the risk of rejection of applications
For domestic APAs, counterparty to the transaction should also comply with the terms of the APA, though for the purpose of legal effect, there is a reference that it is binding only on the signatories to the APA.
APA applications can be rejected under various circumstances – including limited scope of transactions and where ALP can be reliably applied; shifting the focus to applications for complex business arrangements for which tax certainty is required
Emphasis on conduct and contract to be aligned as well as maintenance of comprehensive documentation supporting the APA applications including the assumptions made in forecasts

The APA programme represents a robust mechanism for dispute resolution, promoting tax certainty and unanimity in the approach relating to the controlled transactions. Taxpayers should assess the suitability of the APA option by weighing the nature, significance, and value of their transactions against the time and cost required for the process. Moreover, an APA requires a clear understanding of underlying transaction economics, business context, & transfer pricing rationale to position better during negotiations with the FTA.

Do reach out to VSTN for any support on APA

Open Attachment…

APA – Corporate Tax guide

United Arab Emirates

January 2026

Background

The Federal Tax Authority (FTA) has released the much-awaited UAE APA guide in December 2025. The guide provides comprehensive insights into the APA programme including procedures, monitoring and review mechanisms and will support taxpayers in making an informed decision on opting for the APA scheme. While the APA guidelines are not legally binding, it has been published to assist taxpayers in understanding the APA programme under the Corporate Tax regime in the UAE.

Key Features of the APA programme

Particulars	Provisions
1. Eligibility	a) Cross border or b) Domestic Controlled transactions (where subject to different tax rates or eligible for tax incentives). Controlled transactions falling under safe harbour provisions cannot be covered
2. Threshold	Controlled Transactions of AED 100 mn per year (At FTA’s discretion, applications not meeting the threshold can also be accepted)
3. Covered period	Prospective period of 3-5 years, rollback not yet prescribed
4. Phased rollout	UAPA initially, BAPA & MAPA to be announced subsequently
5. Acceptance of applications	UAPAs for domestic transactions from December 2025, for cross border transactions to be announced
6. Application timelines	Earlier of 2 months (mentioned as 40 days in another section) from the date of pre-filing approval, or 12 months prior to commencement of the first Tax Period to be covered
7. APA filing fees	AED 30,000 for fresh applications (inclusive of amendments), AED 15,000 for renewals

1. Overview

The APA programme offers a voluntary mechanism for a Person to enter into an agreement with the FTA for determining the Arm’s Length Price of Controlled Transactions over a period of time in advance and prevent the risk of TP disputes and litigation. An APA shall be binding on the person who has entered into the agreement and the FTA.

For domestic APAs, counterparty to the transaction should also comply with the terms of the APA, though for the purpose of legal effect, there is a reference that it is binding only on the signatories to the APA.

2. Types of APAs

APAs can be categorized into three types:

Unilateral APA: Agreement between a person and the FTA for domestic and cross border Controlled Transactions
Bilateral APA: Agreement between competent authorities of two jurisdictions reached through a Mutual Agreement Procedure (‘MAP’).
Multilateral APA: Set of agreements between competent authorities of more than two jurisdictions reached through a MAP.

Currently, a phased rollout has been adopted with only unilateral APAs introduced initially, with subsequent expansion to bilateral and multilateral agreements.

3. Eligibility Criteria

A Person may apply for an APA if there are significant uncertainties in determining the appropriate criteria for establishing the Arm’s Length Price of proposed or existing Controlled Transactions such as cases involving:

Complex Business operations or Controlled Transactions
Where such Controlled Transactions have been historically subject to audit.

Transactions that fall under Safe Harbour provisions, including low value adding intra-group services are excluded from the purview of APA. Cross border transactions as well as Domestic Controlled Transactions may be covered under an UAPA if the Person and its domestic Related Party are subject to different tax rates or are eligible for any tax incentives under the Corporate Tax Law.

APA applications can be rejected under various circumstances – including limited scope of transactions and where ALP can be reliably applied; shifting the focus to applications for complex business arrangements for which tax certainty is required.

4. Threshold

A person can apply for an APA if it meets the materiality threshold of Controlled Transactions of AED 100 million per tax period. Only the value of transactions that are proposed to be included in the APA should be included. A person not meeting the threshold criteria may still apply for an APA, if they could provide robust justification on why an APA would help ensure compliance and certainty in such cases.

An application can be accepted even where the threshold is not met and can be rejected even if the threshold is met, emphasizing that the focus is on the nature and complexity of transactions and not merely the quantum.

5. Who can apply

A pre-filing consultation and APA application must be filed by a Person, its Tax Agent (registered for CT purposes with FTA) or Legal Representative on behalf of the Person. In case of a Tax group, only the Parent company of that tax group is permitted to submit the APA.

Applications and any other information required during the APA process can be submitted from 30 December 2025 by email to APA@tax.gov.ae or via EmaraTax (from the date to be announced).

6. APA Revision, Cancellation & Renewal

Revision/ cancellation
APA may be revised if there is any change in the law, business or economic conditions or exceptional circumstances. A Person must self-assess the need to revise an APA and intimate the FTA within 20 Business Days from such event. The FTA can also initiate revision at its discretion.
Revocation/ cancellation
FTA may revoke or cancel an APA in the following cases:
- Material misrepresentation or wilful defaults
- Failure to comply with material terms and conditions of APA
- Breach of one or more critical assumptions
Revocation shall take effect from the first tax period covered under APA. In case of cancellation, it will be prospective. For the years when the APA is not valid, the taxpayer will be subject to routine audit.
Renewal
A Person may opt for a renewal of an APA if there are no material changes in the Business operations and facts relating to the Controlled Transactions and the critical assumptions remain valid. APA renewal request will need to be filed at least 3 months before the expiry of the existing APA.

Stage 1
Pre- filing consultation

Pre-filing request to be made to FTA in prescribed form
Pre-filing meetings assess the possibility of entering into an APA
One or more pre-filing meetings will be scheduled by FTA

Prefiling consultation to be completed within 6-9 months from request. Notification of outcome by FTA within 60 days of consultation meeting

Stage 2
APA application filing

APA application to be filed in the prescribed form
FTA and taxpayer shall agree a project plan outlining timelines for each stage of the APA process
Review of APA application including request for additional information, conducting site visit and interviews*

File application within earlier of 2 months (other reference of 40 days )from the date of pre-filing approval, or 12 months prior to commencement of the first Tax Period to be covered

Stage 3
Evaluation & Negotiation

FTA prepares a TP analysis addressing the manner and criteria for determination of ALP based on the information obtained
Discussion of TP analysis
If FTA and applicant are unable to reach mutually agreeable position, the application may be dropped.

Taxpayer’s feedback on FTA’s TP analysis to be provided within 30 Business Days from the date of receipt of such analysis

Stage 4
Conclusion & Implementation of APA

Signing of APA agreement based on terms mutually agreed.
Application may be withdrawn at any time before conclusion of the agreement.
FTA shall not use any information and documents gathered during the APA process for audit purposes#

Conclusion of APA within best practice timelines prescribed by the OECD (i.e. within 24-30 months)

*All information requested by FTA should be submitted within 40 business days of request.

# In many jurisdictions, separate teams manage APA programmes and audit procedures. In this case, however, the FTA oversees both. A firewall provision has been established to ensure that APA-related information is not used for audit purposes.

UAPAs for cross border Controlled Transactions shall be exchanged with foreign tax administrations of the jurisdiction of ultimate parent entity, immediate parent entity and counterparty of Controlled Transactions in accordance with BEPS Action 5.

APA Monitoring & Review – Filing of Annual Declaration

Upon entering into an APA, a person is required to file an APA Annual Declaration for each tax period covered under the APA in the prescribed form. The declaration is to be filed within 90 business days

from the date of signing the APA or by the due date of filing each relevant tax return, whichever is later.

Reasons for Rejection of prefiling request / APA application

A pre-filing request / APA application may be rejected for the following reasons:

Pre-filing request	APA application
Indication of a tax avoidance strategy Controlled transactions based on superficial scenarios Limited scope ALP can be reliably applied beyond significant doubt Significant restructuring forecasted, whereby outcomes of APA would be irrelevant Unpredictable or fluctuating business Where insufficient historical records restrict reliable projections or there are discrepancies in selection of most appropriate method or benchmarking analysis. Decision to include or exclude transaction without a satisfactory rationale	The conditions prescribed for pre-filing requests* Materiality threshold not met, APA application does not address concerns raised during pre-filing consultation, Significant discrepancies between legal contracts and actual conduct of Business, Significant changes in facts and circumstances since the outcome of pre-filing or during processing of APA application Inadequate and unreliable economic analysis, Requests for information not responded to in a timely manner Incorrect, incomplete or misleading information in application Sufficient records not maintained to demonstrate that assumptions made in forecasts are accurate.

Pre-filing request

APA application

Indication of a tax avoidance strategy
Controlled transactions based on superficial scenarios
Limited scope
ALP can be reliably applied beyond significant doubt
Significant restructuring forecasted, whereby outcomes of APA would be irrelevant
Unpredictable or fluctuating business
Where insufficient historical records restrict reliable projections or there are discrepancies in selection of most appropriate method or benchmarking analysis.
Decision to include or exclude transaction without a satisfactory rationale

The conditions prescribed for pre-filing requests*
Materiality threshold not met,
APA application does not address concerns raised during pre-filing consultation,
Significant discrepancies between legal contracts and actual conduct of Business,
Significant changes in facts and circumstances since the outcome of pre-filing or during processing of APA application
Inadequate and unreliable economic analysis,
Requests for information not responded to in a timely manner
Incorrect, incomplete or misleading information in application
Sufficient records not maintained to demonstrate that assumptions made in forecasts are accurate.

*Even if a pre-filing request is approved, an APA application can be rejected on the same conditions prescribed

Prescribed forms/ details

Appendix 1 of the guide: List of Potential Critical Assumptions

Operational & Economic critical assumptions
Legal critical assumptions
Financials & Tax related critical assumptions
Other assumptions

Appendix 2 of the guide: APA Pre-filing Form

Details of the person and business along with industry overview, tax period, particulars of controlled transaction, proposed critical assumptions etc.

Appendix 3 of the guide: APA Application Form

Details of the Person’s business, related parties, covered tax periods, controlled transactions, market and industry details, transfer pricing methodology for each controlled transaction, financial and operating information, historic transfer pricing background etc.

Appendix 4 of the guide: APA Annual Declaration Form

Declaration on complying with the terms and conditions of the APA

Way forward for taxpayers

Thorough planning and preparation are essential before submitting an APA application. Pre-filing consultations are mandatory, and APA applications can be filed only on approval of the pre-filing request, highlighting the importance of clear communication with the FTA from the outset. Pre-filing consultations take on particular importance, as they require taxpayers to address multiple aspects with the FTA and reduce the risk of rejection under the circumstances outlined in the guide.

Moreover, there is an emphasis on conduct and contract to be aligned as well as requirement for maintenance of comprehensive documentation supporting the APA applications including the assumptions made in forecasts.

Moving forward, taxpayers may consider the following steps:

Confirm eligibility to apply for APA scheme for relevant Controlled Transactions
Evaluate APA feasability considering nature, criticality & value of the related party transactions vis-à-vis time & cost involved in the process
Determine strategy – transactions to be covered & optimum period to cover

APA feasibility study

Evaluate existing TP Policies and align the same with commercial substance
Maintain intercompany agreements reflecting the TP policy
Align contract with actual conduct of parties

Streamlining of TP arrangements

Determine whether threshold of AED 100 mn met* -after determining ALP of transactions
Detailed functional and economic analysis to be conducted
Preparation of pre-filing application based on agreed strategy

Preparation of APA application

*APA application can be accepted even where threshold < AED 100 mn, at FTA’s discretion

How VSTN can support

The APA programme represents a robust mechanism for dispute resolution, promoting tax certainty and unanimity in the approach relating to the controlled transactions. Taxpayers should assess the suitability of the APA option by weighing the nature, significance, and value of their transactions against the time and cost required for the process. Moreover, an APA requires a clear understanding of the underlying transaction economics, business context, and transfer pricing rationale to obtain a better outcome during negotiations with the FTA.

VSTN’s team brings extensive expertise in managing APA assignments, having successfully supported clients in concluding multiple APAs in other jurisdictions.

VSTN offers end-to-end support in APA process including:

Feasibility Analysis considering the cost benefit analysis
In-depth analysis of business and aligning the transfer pricing policy with the business model
Providing strategic guidance in preparation and submission of pre-filing request
Represent before FTA in pre-filing consultations
Preparation and submission of APA applications and other information requested by FTA
Negotiation with Tax Authorities and support during site interviews/meetings
Post conclusion support – Filing of annual declaration and FTA review
APA renewal support

About us

VSTN Consultancy has been honored with the Best Global Transfer Pricing Consultancy 2025 – India award at the prestigious Wealth & Finance Management Consulting Awards 2025.

Locations Served

Australia	Philippines
Belgium	Singapore
Denmark	Switzerland
India	Turkey
Italy	UAE
KSA	UK
Mexico	USA
Netherlands	Zambia

Core Team

vstn

Nithya Srinivasan

Srilakshmi Hariharan

S Ranjani

E Rajesh

Nitya Joseph

Saranya Nagarajan

Triveni Palla

9:19:52/02:24.4

centest@vetmconsultancy.com

www.vstnconsultancy.com

Our Licensed Databases

SNo	Database	Provider
1	TP Catalyst	Moody’s
2	ORBIS	Moody’s
3	Loan Module	Moody’s
4	IP & Royalty Data	Moody’s
5	Royalty Rates and Benchmark Module	ktMINE
6	Services CUT	ktMINE
7	EDF-X Bond Database	Moody’s
8	EDF-X Credit Risk Analytics	Moody’s
9	Loan Module	Royalty Range
10	Transfer Pricing Documenter (formerly Thomson Reuters Onesource)	Ryan
11	Prowess	CMIE

Whether you’re preparing for benchmarking intercompany transactions, or developing robust TP documentation, our team is here to support your international strategy and Compliance.

#TransferPricing #TransferPricingFirm#VSTNConsultancy #TaxCompliance #IndiaUAEUSA

#TPExperts#TransferPricingExperts#GlobalTransferPricingFirm