With globalisation of businesses being on the rise, there has been a substantial rise in interdependence among group companies. MNCs often find themselves engaged in multiple transactions with and on behalf of each other. Such transactions are frequently undertaken to achieve cost efficiency and not necessarily with the intention of making a profit. Some of the prevalent practices include allocation of common costs such as those related to IT and procurement, cross-charging for personnel and other types of cost-sharing arrangements. This recoupment of expenses is commonly known as ‘reimbursement’.
This report is a ready reckoner on the issues faced with respect to direct tax, transfer pricing and indirect tax in reimbursement pertaining to transactions. Various types of transactions have been discussed in the report and tax-related issues have been analysed in light of prevalent court rulings. The publication also provides details of documentation parties should maintain in support of the expenses they have incurred.
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