Finance_ Intercompany Invoice_BMS charge

 "BMS charge" stands for charges related to Business Management Services or a similar term like Business Management Support.

It's not a universally standardized accounting term like "depreciation" but is commonly used within multinational companies to describe fees charged between related entities (e.g., from a parent company or regional headquarters to a subsidiary) for providing centralized management, administrative, strategic, or support functions.

These charges typically cover services such as:

  1. General Management & Strategic Oversight: Guidance on overall business strategy, planning, and performance monitoring.
  2. Centralized Functions: Support from corporate departments like Human Resources (HR), Finance, IT, Legal, Marketing coordination, Procurement, etc., where these functions are managed centrally rather than duplicated in each subsidiary.
  3. Technical or Operational Support: Centralized expertise or support related to operations, quality control, or specific technical areas.
  4. Administrative Support: General administrative assistance coordinated centrally.

Why it's relevant in Transfer Pricing:

  • Cost Recovery: The entity providing the services (e.g., the parent company) incurs costs and uses BMS charges to allocate and recover these costs (often with an appropriate profit margin or markup) from the entities receiving the benefit of the services (e.g., the Indian subsidiary).
  • Arm's Length Principle: Tax authorities, like the Indian TPO in your example, scrutinize these charges to ensure they comply with the arm's length principle. This means they check if:
    • The services were actually needed and provided.
    • The recipient entity genuinely benefited from them.
    • The services don't duplicate activities already performed locally.
    • The price charged (the BMS charge) is comparable to what independent companies would charge for similar services under similar circumstances.

So, in essence, a BMS charge is an internal fee within a corporate group for managerial, administrative, and support services provided by one entity to another, which must be justified and priced correctly according to transfer pricing regulations.

댓글

댓글 쓰기

이 블로그의 인기 게시물

TP_ Benchmark_ Mexico

 S - Changes to the mark-up percentages that are identified in this email based on further work with PWC?  Or, do these percentages still stand?  We expect that this should reconcile to the trial balance. O- The CIP write off and the success fee expense did not move the markup %'s after PwC recommended adjustments. However, there is one small amounts  related to regular fixed asset disposal operation that can slightly reduce the %'s.  S- Do you have the new #s now, or are they still in process?  If still in process, do you have an idea on timing? O- However, to be consistent with prior years where these same fixed assets disposals were not included in the markup % for the TP Study, I have not included them this year for the TP Study either.  I reported yesterday 4.58% for Mfg vs 4.44% that yo can see in the chart S-  Will these totals tie to the financial statements?  Do you expect any other changes at this point?(I would guess you are going ...
자세한 내용 보기

Treaty analysis _ Germany & Thailand _ Technical services rendered by Thailand people in Germany

Q- What is tax implications for technical services performed by Thailand people in Germany? Duration of the work; 2-3 months, US entity is a benefiting entity from this work. US entity and Thailand entity are related parties and Thai company will invoice for their people's work in Germany to the US company.  1. German Withholding Tax (WHT) or Corporate Tax Exposure Even though the Thai company invoices a US entity, German tax authorities may tax the income earned from activities physically performed in Germany. • If the Thai company has a taxable presence (“permanent establishment” or PE) in Germany due to its employees working there for 2–3 months, Germany may tax the income attributable to that PE. • The presence of employees physically performing services in Germany, even temporarily, can trigger a PE under German law if: • There is a fixed place of business (e.g. office, project site); or • The work involves a “service PE”, potentially triggered under Germany–Th...
자세한 내용 보기

Intercompany loan_ Capitalized Interest

  Capitalized interest specifically in the context of an intercompany loan. 1. Intercompany Loan Basics: An intercompany loan is simply a loan made between two related companies within the same corporate group (e.g., a parent company lending to a subsidiary, or one subsidiary lending to another). Like any loan, it typically carries an interest rate. The borrowing company incurs interest expense, and the lending company earns interest income. Transfer pricing rules generally require this interest rate to be set at "arm's length," meaning similar to what unrelated parties would agree to. 2. Capitalized Interest (General Accounting Principle): Normally, interest expense incurred by a company is recorded on its income statement in the period it's incurred, reducing net income.   However, accounting standards (like US GAAP ASC 835-20 or IFRS IAS 23) require or permit companies to capitalize interest costs under specific circumstances. Capitalization means adding the...
자세한 내용 보기