NRI PROBLEMS
Transfer pricing issues are an irritant for multinational companies doing business in India. Is there any way of mitigating the litigation? — FR Ismail, Abu Dhabi
In order to reduce the litigation and bring some certainty on transfer pricing issues, the Government announced the policy whereby multinationals may, if they so wish, enter into an Advance Pricing Agreement with Indian tax authorities. This policy has been appreciated by multinational companies and more than 240 companies have applied for entering into this agreement. The APA applications have been made by companies belonging to different sectors, primarily information technology, IT-enabled services, pharmaceuticals and chemicals, as well as those dealing with financial services.
The issues which are covered under APA agreements pertain to royalties, corporate guarantees, outsourcing and interest. The advantage of the APA is to determine in advance the transfer pricing method and rules to be adopted between parent and subsidiary companies in respect of pricing of tangible and intangible assets, services, and funds which are to be transferred in a cross-border transaction. Indian tax authorities have responded positively and several APAs have already been signed. This will ensure clarity on vexatious issues. In some of the foreign journals I have read about Bitcoins. I want to know about this product and its accounting treatment for those who possess them. — BR Mathew, Dubai Bitcoins are generated by computers. They do not have the backing of any government or central bank. The Bitcoins are virtual currencies. Governments are not treating them as legal tender currency. New Bitcoins come from a process which is called mining. The American In- ternal Revenue Service has taken the view that Bitcoins should be treated as property. The general accounting and tax principles which apply to property transactions will apply to Bitcoins. Therefore, the value of the Bitcoins would be taxed either as income or as capital gains depending upon whether they were held as stock-in-trade or as capital assets.
According to the IRS, miners of the Bitcoins must include the fair market value of this virtual currency as income on the date of receipt. The IRS guidelines will provide clarity for tax payers who deal in Bitcoins and other digital currencies and who wish to ensure that they are on the right side of the law. The Indian Government wants to disinvest its shareholding in public sector units for bridging its fiscal deficit. Will there be transparency in the disinvestment process to ensure that the best price is received by the Government?
— SL Dhrud, Sharjah The Department of Disinvestment, which is part of the Finance Ministry, proposes to appoint Independent External Monitors to oversee the working and functioning of merchant bankers and other intermediaries who are to be associated with the disinvestment process. The Central Vigilance Commission has suggested that an integrity agreement should be signed between the DoD and the intermediaries for every public sector stake sale. The IEMs who will be appointed for three years will have to ensure that the prospective bidders and buyers of public sector shares do not indulge in any corrupt practice. The IEMs will be appointed with the prior approval of the Central Vigilance Commission. Once they are appointed, they will monitor the bidding process and the execution of contracts by the bidders. The IEMs will objectively review the extent to which the parties comply with their obligations under the integrity agreement.