In the face of numerous transactions of multi-national enterprises and their subsidiaries in the present-day business scenario, a lot needs to be done in form of tax reforms, both at the domestic level and the international sphere, to ensure proper transfer prices and their application in international taxation.
Some measures that can be taken to ensure compliance with the TP regulations are as follows:
It is the responsibility of taxpayers to maintain contemporaneous records that are considered adequate for the purpose of proving that transfer prices confirm arm’s length principles. Such records must be kept for a prescribed minimum period. The burden of proof of compliance with the arm’s length principle is on the taxpayer. However, the same is discharged upon by the provision of relevant documents.
The use of modern technology seems a veritable tool for managing transfer price systems for efficacious disposal and determination of genuine transfer prices.
TP regulations on multi-national enterprises should work on the following issues for effective pricing standards.
I. Establish group TP Policy
II. Align group TP Policies with regulations
III. Set up internal structures to handle TP policies, documentation, and reporting.
IV. Design internal control and reporting system for the controlled transactions.
V. Secure services of TP Professionals to handle the negotiation, documentation, analysis, and filing activities.
VI. Ensure that the contracts for intra-group transfers are properly documented.
VII. Secure TP Compliance personnel.
APAs are an effective way to mitigate tax uncertainty, especially when the skates involved are significant.
