What is transfer pricing?
Transfer pricing is the price paid by the foreign parent company or foreign entity to the local
When it was introduced in India?
What is the current mark up to the local companies
by their parent companies like Google, IBM, and Microsoft?
14-16%
What is Arms length pricing?
This is international standard pricing method in
which the price of the parent company to their local parts compared with
independent entities.
What are major areas of transfer pricing?
Advertising, marketing, and promotion expenses(AMP)
Some of the AMP expenses are
A. Increasing the brand value of MNC by its
subsidary in India. For example, expenses incurred for increasing brand value
of Unilever by Hindustan Unilever limited.
B. Creation of supply chain
Example: Cost of developing distribution network in
India by Vodafone.
C. Conducting market research in India
Illustration: Coca-Cola cola marke research on Diet
coke in India.
Issues
.
1. These are not included in the international
transactions.
