India has the highest number of litigations over transfer pricing, where MNCs have been charged of reducing their tax liability by transferring profits to group companies abroad, a survey has found.
“India has the maximum transfer pricing litigations, almost two times that of the number two country,” E&Y said in its Global Transfer Pricing Survey.
The country has over 1,500 cases pending under the transfer pricing, it said.
A large number companies are accused of selling goods and services to their subsidiaries at inflated prices under transfer pricing, to reduce profits and hence tax liabilities.
The law requires that goods and services should be sold to subsidiary companies at arm?s length price — the price at which goods are traded between unconnected companies.
The survey included 877 multinationals from 25 countries.