Advance Pricing Arrangement, Transfer Pricing and MNCs: The Implications for Foreign Investment in India

ACHIEVING COMPETITIVE ADVANTAGE THROUGH MANAGING GLOBAL RESOURCES, pp. 382-392, Nejdet Delener, Leonora Fuxman, F. Victor Lu, Luis Eduardo Rivera Solis, Che-Jen Su, eds., Global Business and Technology Association, State University of New York, New York, USA, 2007

9 Pages Posted: 1 Mar 2011 Last revised: 14 Aug 2012

See all articles by Pawan K. Chugan

Pawan K. Chugan

Nirma University - Institute of Management

Date Written: July 1, 2007

Abstract

International transfer pricing controversies and subsequent litigations with taxation authorities have become the major issues in foreign investments and international technology transfers. Disputes between the taxation authorities and MNCs are mounting up as most of the MNCs are now contesting the demands raised by the taxation offices in host countries for the alleged violation of transfer pricing norms. Advance Pricing Arrangement (APA) is one such system that provides transparency, saves time and cost for both the taxation authorities and MNCs and paves the way for smooth flow of foreign investments and international technology transfers. A number of developed as also the developing countries like China have already adopted the APA system. Many other countries including India, however, still have been exploring the possibilities to adopt APA system. In this context this paper describes the concepts of transfer pricing and advance pricing arrangement and explains how taxation policies can motivate the MNCs to determine transfer pricing. Further, it explains as to how it is important for India to adopt advance pricing arrangement (APA) in the present global environment if she has to attract more foreign investments and international technology transfers.

Keywords: Multinational Corporations (MNCs), Transfer Pricing, Arm’s Length Pricing, Abuse of Transfer Pricing, Transfer Pricing and Taxation, Advanced Pricing Arrangements (APAs), Unilateral APA, Bilateral APA, Procedure for Advance Pricing Arrangement, Transfer Pricing Legislation in India, APA

JEL Classification: E62, F21, F23, H2, H32, H87

Suggested Citation

Chugan, Pawan Kumar, Advance Pricing Arrangement, Transfer Pricing and MNCs: The Implications for Foreign Investment in India (July 1, 2007). ACHIEVING COMPETITIVE ADVANTAGE THROUGH MANAGING GLOBAL RESOURCES, pp. 382-392, Nejdet Delener, Leonora Fuxman, F. Victor Lu, Luis Eduardo Rivera Solis, Che-Jen Su, eds., Global Business and Technology Association, State University of New York, New York, USA, 2007. Available at SSRN: https://ssrn.com/abstract=1773176

Pawan Kumar Chugan (Contact Author)

Nirma University - Institute of Management ( email )

Sarkhej Gandhinagar Highway
Ahmedabad, Gujarat 382481
India
+912717241900 (Phone)
+912717241916 (Fax)

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