The Central Board of Direct Taxes—in an effort to address the increasing number of transfer pricing audits and prolonged disputes—has issued revised “safe harbour rules.”
Safe harbour rules were originally issued in September 2013. Nevertheless, the safe harbour program has received what is described as a “tepid response” from taxpayers in India, due to perceived high margins and ambiguity in the classification of services. In an effort to address these issues, the tax authorities on 7 June 2017 issued revised safe harbour rules.
The new safe harbour rules for all contract services have been revised:
There are new provisions concerning the safe harbour for receipt of low value-adding intra-group services, and safe harbour rates are introduced for loans advanced in a foreign currency. The new guidelines also clarify the definitions of operating costs and operating revenue.
Read a June 2017 report [PDF 340 KB] prepared by the KPMG member firm in India
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