Indian and US competent authorities reach settlement
May 14, 2010
The Indian and US competent authorities have reached an agreement over transfer pricing disputes relating to the mark-up for the software services provided by Indian enterprises to related parties.
The topic that was the subject of several mutual agreement procedure (MAP) applications recently.
“The Revenue authorities in India have been aggressive in transfer pricing audits and have generally assessed the transfer prices of contract software service providers, which are normally compensated at a full cost plus mark-up for their services, at a mark-up in the region of 25% to 28% on costs for the financial year 2004-05 relevant to year ended on March 31, 2005,” said PricewaterhouseCoopers in a client circular. “In light of this, over the past few years, several US affiliates of Indian companies have filed MAP applications in the US under the India-US double tax avoidance treaty.”
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