Cross-Border Transactions Vis-à-vis Transfer Pricing And Double Taxation

Introduction

The intricacies of cross-border transactions could overwhelm, as the process has to be planned from the perspective of transfer pricing and double taxation.

Imagine a business group operating with two associated group companies-one each operating Overseas and in India. While the overseas firm searches prospects, finalizes clients, and secures orders, the Indian arm offers software, technical, and operational support. Despite running separate operations, both companies are owned by the same promoters who own and run both businesses. From a business standpoint, this setup works quite well. While services move from India to the overseas firm, the payments move back to India, helping both group companies to run their operations smoothly. However, things become complicated the moment taxes come into play.