Safe harbor rules is a mechanism under which in certain circumstances tax authorities accept the transfer prices declared by tax payer without undertaking detailed audit. The tax authorities have introduced rules prescribing procedure for adopting safe harbor, the transfer price to be adopted, the compliance procedures upon adoption of safe harbor and the circumstances in which a safe harbor adopted may be held to be invalid.
The categories of international transactions covered under the safe harbor provisions include:
- Provision of software development services
- Provision of IT enabled services
- Provision of knowledge process outsourcing services
- Advancing of intra-group loans
- Provision of corporate guarantee
- Provision of contract research and development services
- Manufacturing and export of auto components
- Receipt of low value adding intragroup services
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