Union Budget 2021: Global firms, Indian MNEs better off with predictable tax regime, transfer pricing certainty

The economy crippled by the pandemic is showing signs of a rebound. Global and Indian multinational enterprises while focussing on business want a predictable tax regime and often regard transfer pricing as a key risk for cross-border transactions and structures. It would also supplement India’s successful Advance Pricing Agreement programme and provide long-lasting transfer pricing certainty. The APA programme itself could be further strengthened – • by bringing in a separate fast track channel for APA renewals • by keeping regular transfer pricing assessment proceedings of covered years in abeyance till the conclusion of the APA to preclude more disputes piling up and adding to the backlog • by relaxing the restrictions on APA rollbacks It may also be prudent to usher in the concept of block audits whereby a number of years are scrutinised together. It may be an opportune time to • Consider expanding the exclusion list to capital intensive industries with long gestation projects, • Provide a moratorium on the application of this provision for years impacted by the pandemic • Completely eliminate the carry forward timeframe of eight years or stretch the carry forward period • Clarify implicit guarantees are not covered by this provision to preclude potential disputes This Budget should be used as an opportunity to trigger an economic revival and lay a strong foundation for the future.