Fresh transfer pricing trouble for MNCs

Secondary adjustment provision in Budget FY18 could hit cash flow, dividend payout

A new provision for secondary adjustment in transfer pricing, announced in the Union Budget for 2017-18, is likely to affect the cash flow of multinational corporations (MNCs) and the dividend distribution tax paid by their Indian subsidiaries. The provision has also sparked worry on Minimum Alternate Tax (MAT) and service tax payable by the subsidiaries, as well as retrospective implementation from 2013-14.  

Experts claim the provision is in line with the norms of the Organisation for Economic Co-operation and Development (OECD) — an international economic organisation with 35 member nations — but its wording is giving rise to apprehension.