Draft Indian transfer pricing rules permit use of range and multiple year data

The Indian government on May 21 released draft transfer pricing rules that would introduce the concept of a range for determining arm’s length price as well as allow the use of multiple year data for comparability purposes.

The rules would implement changes made in Finance (No. 2) Act, 2014, replacing India’s current practice of only allowing data from the year of the transaction and its use of the arithmetic mean in all cases. Under the draft, arithmetic mean would continue to apply in cases that do not meet the requirements for use of a range, such as when comparables are considered inadequate.

Finance Minister Arun Jaitley first announced an intent to introduce the changes last summer, stating that the government believed the amendments would reduce litigation and align India’s transfer pricing regime more closely with global best practices.

Comments are requested on the draft by May 31.

See:

• Release

• Draft proposed rules

Related MNE Tax articles:

• India announces transfer pricing reforms, disappoints on indirect share transfers