A Break in the Dam? India’s New Profit Attribution Proposal and the Arm’s Length Standard

22 Pages Posted: 8 Jul 2019

See all articles by Reuven S. Avi-Yonah

Reuven S. Avi-Yonah

University of Michigan Law School

Ajitesh Kir

University of Michigan at Ann Arbor - Law School - SJD Candidate

Date Written: July 3, 2019

Abstract

On April 18, 2019, the Indian Central Board of Direct Taxes released a public consultation document on amending India’s rules for profit attribution to permanent establishments. This remarkable document is the first time a national government has proposed what in essence amounts to an abandonment of the arm’s length standard (ALS), the governing standard in transfer pricing for over 80 years, in favor of a formulary system. Given that the OECD has also raised the option of using formulas to allocate profits to market jurisdictions, India’s unilateral move may signal the proverbial break in the ALS dam, with the potential of leading to an abandonment of the ALS in favor of a unitary tax system.

Keywords: transfer pricing, arm's length standard

JEL Classification: H26

Suggested Citation

Avi-Yonah, Reuven S. and Kir, Ajitesh, A Break in the Dam? India’s New Profit Attribution Proposal and the Arm’s Length Standard (July 3, 2019). Available at SSRN: https://ssrn.com/abstract=3414266 or http://dx.doi.org/10.2139/ssrn.3414266

Reuven S. Avi-Yonah (Contact Author)

University of Michigan Law School ( email )

625 South State Street
Ann Arbor, MI 48109-1215
United States
734-647-4033 (Phone)

Ajitesh Kir

University of Michigan at Ann Arbor - Law School - SJD Candidate

Ann Arbor, MI
United States

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