To boost the IT sector investments in India & to reduce the litigation for foreign companies setting up in India, India is moving to major changes in “Transfer Pricing’. A major shift is being seen in ‘Transfer Pricing’ for IT Companies & data centers setup by foreign companies in India.
1) Common Safe Harbor margin for IT Companies- Common Safe harbor margin is introduced for under Information Technology Services at the rate of 15.5%. it is proposed to club the provision of software development services, provision of IT services & Research & development services under one specific rule of Information Technology services.
2) Threshold increased for Safe Harbor application- Threshold for availing safe Harbor being enhanced substantially from INR 300 crore to INR 2,000 crores
3) Continuous application for 5 years- Once applied by an Information Technology Services company, the same safe Harbor can be continued for a period of 5 years at a stretch at its choice.
4) Safe harbor rule introduced for component warehousing in a bonded warehouse- It is proposed to introduce a safe Harbor to nonresidents for component warehousing in a bonded warehouse at a profit margin of 2 percent of the invoice value
If you have a footprint n India, check does your services qualify for Safe Harbor rules
Check the impact your Company will have on application of Safe Harbor
