International Taxation Document type: Sharmila Maitra The Indian Supreme Court's decision in the Vodafone case brings to an end the long saga that has kept global investors on edge about the taxation of foreign acquisitions in India. Against settled principles of the taxation of cross-border acquisitions, the Indian tax authorities has taken a highly aggressive position that has subjected a sale of stock of a non-Indian corporation by and between two non-Indian residents to Indian taxation.
Satya Sekhar vssg17 gmail. A goal of transfer pricing may be to maximize after tax revenue besides reduction in the total tax paid.
Financial experts say that the abuse of transfer prices is a key tool used by the corporate entities to think that they have virtually no profit; hence, they shouldn't pay any taxes.
In this context this case study is divided into two parts. This study intends to focus on the strategies adopted by corporate entities in general and Vodafone Company in particular. To understand the process of transfer pricing technique used in corporate entities.
To examine the impact of transfer pricing on tax policy. To analyze the pros and cons of Vodafone company and its transfer pricing strategy. First part of the paper focuses on conceptual approach and second part deals with the case study.
The rapid growth in off trans-corporate entities regarding their accounting shoring business services should therefore exacerbate transactions to minimize tax liabilities. The prices of already high tensions in this area of transfer-pricing transactions between associated enterprises, which are regulation.
These pricing mechanism, is certain to become a part of the guidelines require corporate entities to follow the arm's economic life of all developing countries as major length principle, i.
Transfer pricing is, developed countries such as USA and UK have had transfer and has been for many years, the most contentious issue in pricing law for decades. Thus, transfer pricing is an area fraught with transnational companies believed their transfer-pricing difficulties and pitfalls for the unwary.
The problem starts when they use fraudulent transfer pricing and other tricks to 1 Waman Y Kale, Transfer Pricing- Practical Issues and artificially shift their income from other countries to a tax- Controversies, The Chartered Accountant, October,haven.
This increase of information has complicated rules that limit the extent to which companies seen many companies significantly expanding their cross- can shift income out of the United States. Increasing technology and decreasing Transfer Prices have been described as: While many studies have addressed geographic areas that may have been unattainable earlier.
From the perspective of tax Yoon K. Choi 3 examines the relation authorities around the world, transfer-pricing is fast gaining between transfer pricing and production incentives using a importance, necessitating change in legislation to protect tax model of a vertically integrated firm with divisions located revenue bases.
In major industrial countries, such legislation in different tax jurisdictions. His study shows that if has primarily been driven by developments in the US and divisional profits are taxed at the same marginal rate, the other OECD member-states.
As Transfer Pricing and Multinational tax system: Transfer-pricing regulations for income tax liability. For instance, materials Feinschreiber, Transnational companies are the United States has agreements with most other nations expected to follow the benefit-cost principle, with little that determine how multinational companies are taxed.
These has selected used a variety of methods to reduce their overall rules attempt to tax all multinational corporate income once tax rates, including setting up holding companies in tax and only once which excludes the double-taxation that havens, taking full advantage of tax incentives such as the occurs at the Federal and state levels.
In other words, the tax US foreign Sales Corporation export incentive programme, treaties attempt to avoid the double-taxation that would and shifting income to low-tax and expenses to high-tax occur if two nations taxed the same income. In the light of recent corporate tax scandals, these prices represent revenue to the upstream division and an practices would be a useful spring board for a class expense to the downstream division, the transfer price affects discussion of the ethical aspects of tax planning.
For example, if a U. At the same time, the high transfer price increases negotiable royalty based transfer price or a purely negotiated the cost of product to the U. Negotiated transfer pricing provides efficient U. If the marginal tax rate is higher in the U. Choi and Theodore R.
The situation reverses if the drug is finance and accounting,pp The general 4 rule is that the company wants to shift income from the high Roger Y. Tang, Current Trends and Corporate Cases in tax jurisdiction to the low tax jurisdiction.
There are limits Transfer Pricing, Reviewed by Prof. Lorraine Eden, Journal to the extent to which companies can shift income in this of International Business Studies, March, The third depends on the prices at which intermediate goods are method, royalty-based transfer pricing with renegotiation, transferred between the producer the upstream firm and the combines features of both royalty-based and negotiated user downstream firm of the intermediate goods.
When the transfer pricing, protecting the developer of the intangible entities operate in different countries, the transfer price from a hold-up problem and providing efficient investment determines how much of the income earned by the joint incentives for the buyer. This method improves efficiency efforts of the two entities is taxed in each country.
Transfer pricing is referred to the setting of the price for Tim Baldenius, Stefan Reichestein and Savita A goods and services sold between related legal entities within Sahay 6, studied an incomplete contracting model to an enterprise.Britain's top tax official Dave Hartnett has enjoyed a four-night stay in a luxury hotel in India – at a cost of thousands of pounds to the taxpayer – to attend a .
In the case of a resident, it is immaterial whether the place of accrual of income is within India or outside India, since, in either event, he is liable to be charged to tax on such income.
But, in the case of a non-resident, unless the place of accrual of income is within India, he cannot be subjected to tax. In in organization structure induce different investment choices, , the Income Tax Department issued a tax demand of shows that transfer pricing methods based on the price Rs.
3, crore to Vodafone India. The Business & Management Review, Volume 3 Number 4 June The International Conference on the Restructuring of the Global Economy (ROGE), London-UK Vodafone: predicament of Income Tax in India- an analysis.
Retrospective tax cases on withholding tax are triggered by the amendments to the Income Tax Act, which makes indirect transfer of Indian assets including those executed in previous years taxable in India.
Using this amendment income tax official had filed cases against Vodafone, Shell, SABMiller amongst others. Read all customer case studies and success stories, powered by the AWS cloud. AWS provides cloud computing services to hundreds of thousands of customers.