Related Party Transaction in Customs vis a vis transfer pricing Free essay! Download now
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Related Party Transaction in Customs vis a vis transfer pricing
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DescriptionComparative Chart about Valuation of Related Party transaction in Customs vis a vis Transfer pricing in Income tax
Customs Valuation in Related Party Transactions
According to the UNCTAD World Investment Report the transactions, consisting of transfer of goods, services, capital and intangibles like intellectual property, within MNEs account for 60% of the world trade. With the globalisation of economy and rapid advancement in technology, transportation and communication, the flexibility for MNEs to place their enterprise and activities anywhere and in different places in the world has increased manifold. Such transactions are more often than not governed by common interest of the entities of a group. Commercial transactions between the different parts of the multinational groups may not be subject to the same market forces shaping relations between the two independent firms.
The cross-border movement of goods, services and intangibles constitute a major proportion of a MNEs transaction and understanding their accounting treatments and valuation require specialised domain knowledge
WTO Customs Valuation Agreement (the WTO Agreement).
Section 14 of the Customs Act, 1962
Customs Valuation ( Determination of Value of Imported Goods) Rules, 2007
Customs Valuation ( Determination of Value of Exported Goods) Rules, 2007
Related persons have been explained in Rule 2(2) of the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007, which is reproduced below:
For the purpose of these rules, persons shall be deemed to be "related" only if -
(i) they are officers or directors of one another's businesses;
(ii) they are legally recognised partners in business;
(iii) they are employer and employee;
(iv) any person directly or indirectly owns, controls or holds five per cent or more of the outstanding voting stock or shares of both of them;
(v) one of them directly or indirectly controls the other; (.....for the purposes of these rules, one person shall be deemed to control another when the former is legally or operationally in a position to exercise restraint or direction over the latter.)
(vi) both of them are directly or indirectly controlled by a third person;
(vii) together they directly or indirectly control a third person; or
(viii) they are members of the same family.
Explanation I. - The term "person" also includes legal persons.
Explanation II. - Persons who are associated in the business of one another in that one is the sole agent or sole distributor or sole concessionaire, howsoever described, of the other shall be deemed to be related for the purpose of these rules, if they fall within the criteria of this sub-rule.
Rule 2(2) of the Customs Valuation (Determination of Value of Export Goods) Rules, 2007 too has the same definition of related parties as stated above.
Rule 3(3) of the Customs Valuation (Determination of Value of Imported Goods) Rules, 2007 provides for determination of value in respect of related parties.
Rule 3(3)(a) provides that where the buyer and the seller are related, the circumstances ...
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