Prabhakar K S  [Ilaya Azwan]

The Central Board Of Direct Taxes (CBDT) Vide Notification No. 46/2017 Date 7th June, 2017 Notifies Revised List Of ‘Eligible International Transactions’ For Transfer Pricing Safe Harbour Rules.

Sl. No. Eligible International Transactions Circumstances

 

01 Software Development Services Operating Profit Margin declared by the eligible assessee from the EIT in relation to Operating

Expense incurred is –

1. Not less than 17%, where the value of International Transaction does not exceed Rs. 100 Cr.

2. Not less than 18 %, where the value of international transaction exceed Rs. 100 Cr. but does not exceed Rs. 200 Cr.

02 Information Technology Enabled Services Operating Profit Margin declared by the eligible assessee from the EIT in relation to Operating

Expense incurred is –

1. Not less than 17%, where the value of International Transaction does not exceed Rs. 100 Cr.

2. Not less than 18 %, where the value of international transaction exceed Rs. 100 Cr. but does not exceed Rs. 200 Cr.

03 Knowledge process outsourcing services The value of international transaction does not exceed Rs. 200 cr. & Operating Profit Margin declared by the eligible assessee from the EIT in relation to Operating is –

1. Not less than 24% & Employee Cost in relation to the Operating Expense is at least 60%;

2. Not less than 21% & Employee Cost in relation to the Operating Expense is 40% or more but less than 60%; or

3. Not less than 18% & Employee Cost in relation to the Operating Expense does not exceed 40%.

04 Advancing of intra-group loans – in Indian Rupees (INR). The interest rate declared in relation to the EIT is not less than the 1 Year marginal cost of funds lending rate of SBI as on 1st April of the relevant previous year plus, –

1. 175 basis points, AEs CRISIL credit rating between AAA to A;

2. 325 basis points, AEs CRISIL credit rating of BBB-, BBB or BBB+;

3. 475 basis points, AEs CRISIL credit rating between BB to B;

4. 625 basis points, AEs CRISIL credit rating between C to D;

5. 425 basis points, where credit rating of the AE is not available & amount of loan advanced to the AEs including loans to all AEs does not exceed Rs. 100 crore in the aggregate as on 31st March of the relevant previous year.

05 Advancing of intra-group loans – in foreign currency The interest rate declared in relation to the EIT is not less than the 1 Year marginal cost of funds lending rate of SBI as on 1st April of the relevant previous year plus, –

1. 150 basis points, AEs CRISIL credit rating between AAA to A;

2. 300 basis points, AEs CRISIL credit rating of BBB-, BBB or BBB+;

3. 450 basis points, AEs CRISIL credit rating between BB to B;

4. 600 basis points, AEs CRISIL credit rating between C to D;

5. 400 basis points, where credit rating of the AE is not available & amount of loan advanced to the AEs including loans to all AEs does not exceed Rs. 100 cr. in the aggregate as on 31st March of the relevant previous year.

06 Corporate Guarantee The commission or fee declared in relation to the EIT is @ not less than 1% pa on the amount guaranteed.
07 Contract R & D services wholly or partly – Software Development The operating profit margin declared by the eligible assessee from the EIT in relation to operating expense incurred is not less than 24%, where the value of the international transaction does not exceed a Rs. 100 cr.
08 Contract R & D services wholly or partly – Generic Pharmaceutical Drugs The operating profit margin declared by the eligible assessee from the EIT in relation to operating expense incurred is not less than 24%, where the value of the international transaction does not exceed a Rs. 100 cr.
09 Manufacture and export – Core auto components The operating profit margin declared by the eligible assessee from the eligible international transaction in relation to operating expense is not less than 12 %.
10 Manufacture and export – Non- core auto components The operating profit margin declared by the eligible assessee from the eligible international transaction in relation to operating expense is not less than 8.5 %.
11 Receipt of low value-adding intra-group services The entire value of the international transaction, including a mark-up not exceeding 5%, does not exceed Rs. 10 cr.

A certificate by Chartered Accountant pertain to

ü The Method of cost pooling,

ü The exclusion of shareholder costs

ü Duplicate costs from the cost pool and

ü The reasonableness of the allocation keys used for allocation of costs to the assessee by the overseas AE.

Source – CBDT’S Notification No. 46/2017/ F. No. 370142/6/2017-TPL dated 7th June, 2017

Author is a budding tax law professional and may reached at ‘ shreetaxchambers@bsnl.in’.

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One response to “Safe Harbour Rules- Eligible International Transactions”

  1. Shivnandan Agrawal says:

    In which form we have to apply for safe harbour

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