The challenges with the profit split method
18 January 2012
Vijay Iyer of Ernst & Young seeks to discuss some aspects of the profit split method (PSM) in Indian, situations in which PSM can be applied, and the approach and challenges in the application of PSM.
The progress and development of the Indian economy over the
past two decades has attracted many multinational enterprises
(MNEs) to knock at its shores and explore the resources and the
market that it has to offer. Consequently, among other things,
this has propelled the Indian tax administration into the
limelight, with MNEs expressing their need to become familiar
with the significant and relevant aspects of Indian tax law and
practice. Ernst & Young's 2010 survey of MNEs on
international tax matters demonstrated that more respondents
identified transfer pricing as the most important tax issue
they face globally as well as in India.
|The OECD has clearly
defined the profit split method
In general terms, transfer pricing methods look to apply the
arm's-length principle as a means to evaluate whether the
profits earned by a MNE is what a third party would have earned
by transacting with another...
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