Does a small Indian subsidiary still need a transfer pricing report?
Yes, if it has an international related-party transaction. The accountant's transfer-pricing report is mandatory on any such transaction regardless of size, which surprises groups whose Indian company is small and whose only dealing with the parent is a single management charge or a cost recharge. There is no threshold to fall under. Groups get caught because they judge the obligation by the amount involved rather than by whether a related-party transaction exists at all. Establish whether there is one, and if there is, the report is part of the annual set from the first year.
What does an Indian subsidiary have to file every year?
Four things sit together: the corporate return, the accountant's transfer-pricing report where there is an international related-party transaction, the tax audit report where the thresholds for it are met, and exchange-control reporting on the foreign investment in the company. They are not independent submissions. They are read together, and they have to agree with one another and with the statutory accounts. A group that treats them as four separate jobs given to three different firms ends up with four documents describing the same year slightly differently, which is the condition in which enquiries start.
Our only intercompany charge is a management fee, is that enough?
It is an international related-party transaction, so it brings the transfer-pricing report with it. One charge is enough. What then matters is that the same figure appears identically in the corporate return, in the report, and in the accounts, and that the report actually addresses how the charge was arrived at rather than asserting that it is reasonable. A single recurring management fee is straightforward to document contemporaneously and troublesome to reconstruct years later, when the person who agreed it has left the group.
What if our Indian return and transfer pricing report do not match?
Assume the difference will be noticed, because the documents are read together. A related-party figure that is one amount in the return and another in the report invites a question about both, and the answer usually involves explaining an internal process rather than a tax position. Reconcile them before filing, not after. The common cause is timing. The accounts close, the return is prepared, an intercompany balance is adjusted afterwards, and the report is written from the earlier file. Fix the sequence so the report is prepared from the same final numbers as the return.
Do we need exchange control reporting if we funded the company once?
The reporting attaches to the foreign investment in the Indian company, so a single injection of capital is still a reportable event. Groups that fund once at incorporation and never again are the ones most likely to have missed it, because there is no recurring trigger to remind them. It is also the item least likely to be picked up by whoever prepares the tax filings, since it is not a tax return. Check it deliberately as part of the annual set, and reconstruct any historic funding from bank records while those records still exist.
Does an Indian subsidiary need a tax audit report?
Where the thresholds that require one are met, yes, and it then forms part of the annual set read alongside the corporate return and the transfer-pricing report. Test the position each year rather than assuming last year's answer holds, because a company that grows through a threshold acquires the obligation without anything else about it changing. And where the report is required, make sure it is prepared from the same final figures as the return. A tax audit report and a return that disagree are worse than either on its own.
When does a construction project create a permanent establishment?
Most treaties give building sites and installation projects their own rule, turning on how long the work continues rather than on whether an office exists. Time is generally counted per site, and related contracts split between group companies are commonly aggregated to stop the threshold being avoided by paperwork. The period differs between treaties, so it is read from the one that applies. See permanent establishment risk.
Should I use a branch or a subsidiary abroad?
A branch is the same legal entity operating in another country, so its profits and losses sit with the parent and it is taxed there as a permanent establishment. A subsidiary is a separate company, taxed in its own right, with dividends and withholding on the way home. Losses, repatriation cost and liability usually decide it, and the answer differs by country pair. See branch vs subsidiary.
