Query on transaction through overseas branch

[A N GAWADE & CO]

Dear All,

We have following query:

Facts:   

Indian software resident company want to set-up as overseas marketing and liasoning branch office in USA. Same branch will help client to get more business which will be developed in India. US Branch will be only a expenses center. No revenue will be booked there.

Query:

1. Being a branch US, it will get qualified as PE in US. Will it attract profits attributable to US PE for taxation in US.  

E.g

Cost of establishment in US is US 100000.

Marketing it has done for India HO to the extent of USD 1 mn.

Global GP ratio of the Co is say 25% and NP 10%.

How profit will be calculated.?

Can we consider cost plus markup approach for above profit attribution. What is the range of mark-up over cost.

2. Will it make difference if its a 100% Subsidiary than branch?

Regards

CA Anand Gawade
Managing Partner

A N GAWADE & CO. Chartered Accountants,
Office Add: Office No 1, Shree Shailya Apartment,
Lane No 14, Prabhat Road, Pune-411004.
Tel Fax 020+25459205 Cell: 98223 48948
Email: a...@angca.com, anga...@gmail.com
Web:    www.angca.com

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[Neelima Bhate]

Situation:

'A India' (owned by XY Individuals- Resident in India) deals with 'A USA' (owned by AB ,  a company to be  formed in Mauritius ( owners are resident of Mauritius).

Out of total  sales/ services turnover of 'A India', 70% to 80% turnover is expected to be with 'A USA'.

There will be "Irrevocable Trust  " Between Owners of 'A USA' ( owned  by Mauritius  Resident company ) and XY Individuals Resident of India (Owners of 'A India'). 

Can such planning will help?

Can A India and A USA treated as 'not associated" in above situation ?

Can transfer pricing will not come in Picture at all?

Please share your Thoughts................

Regards

Neelima Bhate

Neelima Bhate & Associates
Chartered Accountants
401, Citicenter , Opp Ayurved
Rasashala, Karve Road, Pune 411004
TEL: 020-66029148, 9822076964

---

[Shripad Godbole]

It is not clear what is going to be" irrevocable trust"?
The issue would be whether it would bring transaction in the purview
of section 92A(2)(b) .

Regards

Shripad Godbole

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[Neelima Bhate]

I am also not very clear on "irrevocable trust"... if any one is aware of ....Thats why the query .

The person who suggested this is of the opinion that many companies do this to avoid transfer pricing ...does not quoted any name..

 

Neelima Bhate & Associates
Chartered Accountants
401, Citicenter , Opp Ayurved
Rasashala, Karve Road, Pune 411004
TEL: 020-66029148, 9822076964

---

From: Shripad Godbole <godbole...@gmail.com>
To: icai_pun...@googlegroups.com
Sent: Friday, 10 February 2012 1:25 PM
Subject: Re: [ICAI_Pune_Int-Tax] Doubt on "Asscociate Enterprise" classificaton

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