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Why Read Transfer Pricing Audit Framework 2019?

The Transfer Pricing Audit Framework 2019 is effective from 15 December 2019.

Knowing how IRB will conduct their Transfer Pricing is important. It is like a student sitting for exam, this audit framework is akin to the exam syllabus. Knowing the syllabus you will be well prepared and ready when the audit letter arrived.

Audit Duration

Here’s some of the most important component mentioned in the Framework. Unlike conventional field income tax audit which only covers 3 years, Transfer Pricing Audit limited up to seven years of assessment. In event of fraud, willful default, and negligence, there will be no limitation.

Timeline to submit documentation

Taxpayers are given 14 calendar days to respond to the tax authority’s request for documents and information. For transfer pricing documentation, taxpayers are allowed 30 calendar days to submit the documents to the tax authority.

There is a shorter time frame for taxpayers to respond to the audit findings issued by the tax authority (18 calendar days instead of 21 days).     

Since Transfer pricing documentation is now compulsory from 1 January 2020. it is crucial to bare in mind the objective of transfer pricing documentation is to substantiate the arm’s length nature of controlled transactions.

Where the transfer pricing documentation must be prepared accurately and in compliance with the relevant provisions of Income Tax Act, 1967, Transfer Pricing Rules 2012 and Transfer Pricing Guidelines 2012.

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Presentation Slides Required

Other than the documentation, there are one more thing the taxpayers need to add to the to-do list : the presentation slides to show business operations and functional analysis.

The slides must be submitted to the tax authority at least seven calendar days before the audit visit.

We presume the objective of the presentation slides is to give tax authority sufficient knowledge and do their own homework and plan the audit process. Allows the tax authority time and knowledge of what is the taxpayer’s nature of the business and which area should trigger transfer pricing concerns, and which types of documents the audit team should review.

Other important matters                            

  • Settled audit cases will not be selected for audit again for the same issues and years of assessment.
  • There is additional clarification on voluntary disclosure.

If you are involved in transfer pricing documentation, it is crucial to spend time understanding this Transfer Pricing Audit Framework.

Transfer Pricing Audit Framework 2019

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