Transfer Pricing - R&D Units
The Central Board of Direct Taxes (CBDT) has now classified the local captive units of MNCs
into entrepreneurial, cost-sharing arrangements and contract research and development centres.
The new rules list six conditions for an MNC unit in India to be considered a contract research centre with insignificant risk on which 'profit split' method of attributing higher profits is not applicable.
The major change from the earlier rules is that an MNC unit need not fulfill all the six conditions to be eligible for a less stringent tax treatment. The revised circular has dropped the word "cumulatively" to clarify that not all the conditions need not be fulfilled.
into entrepreneurial, cost-sharing arrangements and contract research and development centres.
The new rules list six conditions for an MNC unit in India to be considered a contract research centre with insignificant risk on which 'profit split' method of attributing higher profits is not applicable.
The major change from the earlier rules is that an MNC unit need not fulfill all the six conditions to be eligible for a less stringent tax treatment. The revised circular has dropped the word "cumulatively" to clarify that not all the conditions need not be fulfilled.
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