International
Tax
KCM helps in structuring cross border transactions of tangibles, intangibles and services and inbound and outbound investments for achieving high tax efficiency and minimize the tax risks on an overall basis.
Transfer Pricing Policy Formulation

The firm has formulated the transfer pricing policy for multinational enterprises including the pricing policy and documentation. The firm’s client in this area include

  • An Indian manufacturer of industrial products for intra group pricing to foreign related parties as part of globalization of Indian business. The work involved the policy documentation, determination of initial pricing, review mechanism, documentation requirement and compliance.
  • An Indian EPC contractor executing EPC projects either through subsidiary or project offices outside India had complex web of intra group transactions of product sale, procurement assistance, transfer of personnel and services.
  • Indian subsidiary formed for captive requirement in area of software development, IT enabled services and after sales support services. The project included comparative study of service based invoicing vs. low risk cost plus arrangement.
  • A US company engaged in telecom sector having research and development centre in India under a wholly owned subsidiary which was also responsible for marketing the products / services developed in India as reseller of US company. This had complex issues of ownership of intangibles, marketing margins, cost plus arrangement and intra group sharing of resources.
  • A UK based company had set up a subsidiary in India and was requiring to formulate transfer pricing policy considering cost sharing arrangement and usage of intangibles. The firm supported the same based on Indian laws and also global search of comparables for usage of intangibles in the form of technical knowhow.
Global Transfer Pricing Policy and Compliances

An Indian headquartered company engaged in manufacture and distribution of medical equipment and re-agents had subsidiaries and manufacturing facilities in several countries in Europe and US with complex structure of transactions between these companies. The firm helped the group to formulate world-wide transfer pricing policy considering the tax laws of different countries. The scope also included requirement of maintaining documentation for each of the countries as per their local legislation. The firm also provided support for enabling the group not only to formulate policy but also determine specific pricing of intra group transactions across the product groups.

Transfer Pricing Documentation

Indian tax laws have extensive requirement for maintaining documentation for related party transactions. The same also includes preparation of comprehensive study reports containing the group structure, economic analysis, FAR analysis, industrial outlook, determination of ALP, etc. The India regulation also requires usage of contemporaneous data for determination of ALP based on public databases. The firm has wide spectrum of subscribed database for carrying out the search process which include not only search for margins but also search for pricing the intangibles. At times the firm has used the associated enterprise situated outside India as the tested party requiring the firm to use international databases for the search of comparables. The firm has been active player and one of the leading service provider in this area since introduction of these regulations in India in the year 2001. As part of this service the firm has worked across industry segments, wide variety of transactions, applied all the permitted methods for determination of ALP and have also devised unique methods for justifying the ALP considering nature of set of transactions. The firm has experience of working on following type of transactions:

  • Royalty and Fees for technical services (using TNM / CUP methods)
  • Capital Goods transactions (using CUP / TNM with ROCE / ROR as the base)
  • Purchase / sale of materials using combination of CUP and TNM methods for combining purchase and interest free advance.
  • Software developer and Captive service providers
  • Special business situations where margins are affected by factors beyond control
  • Purchase or sale of products where pricing is based on premium or discount over publicly listed prices like LME, stock or commodity markets
  • Marketing support activities
  • Trading, distribution and indenting services
  • Transfer of personnel including secondment, assignment or deputation
  • Commissions
  • Cost sharing and cost contribution arrangements
  • Financial Transactions like intra group loans, non fund based credit support like bank guarantees, corporate guarantees, comfort letters, equity contributions, buyback of securities, etc.