Amy's International tax

 Q - What is the difference between 'resale minus' and 'cost plus mark-up' in the transfer pricing? In the realm of transfer pricing, which governs the prices of goods and services exchanged between related entities of a multinational corporation, the resale minus and cost plus mark-up methods are two traditional approaches to establishing an arm's length price—a price that would have been agreed upon by unrelated parties. The fundamental difference between these two methods lies in their starting point and the direction of the calculation. The Core Distinction The resale minus method, also known as the resale price method, begins with the price at which a product purchased from a related party is resold to an independent third party. From this resale price, a gross margin is subtracted to arrive at an arm's length price for the intercompany transaction. This gross margin represents the amount from which the reseller would cover its selling and other operating e...

 

 I ncome of an Australian branch of a US company is generally included in the US company's consolidated revenue amount for financial reporting purposes under US GAAP. 1. Branches are not separate legal entities: A branch is considered an extension of the parent company, not a separate legal entity. Therefore, its financial activities are inherently part of the parent company's operations.   2. US GAAP Consolidation Principles: Under US GAAP (specifically ASC 810), a parent company must consolidate all entities in which it has a "controlling financial interest." For a branch, this control is direct and complete, as the branch is part of the same legal entity. The purpose of consolidated financial statements is to present the results of operations and financial position of a parent and all its subsidiaries (and branches) as if the consolidated group were a single economic entity.   3. Financial Reporting vs. Tax: While the Australian branch pays corporate income tax in ...

  This is a common set of questions from a tax department, particularly when dealing with cross-border transactions and new entities. They are trying to understand the nature of the charges and payments for tax purposes (e.g., whether it's a fee, interest, or something else) and how it flows through the entities to ensure proper tax treatment in India. General Context: Your new India entity needs a credit facility (bank line) with Citibank India to issue Bank Guarantees (BGs) t o its customers. BGs are non-fund-based facilities, meaning the bank doesn't directly lend money but provides a guarantee of payment if your India entity defaults on its obligation to the customer. This is crucial for local regulations and customer requirements in India. Tax Department Questions & Explanations: 1. How is the bank compensated for providing the bank guarantee/standby letter of credit? Is it based on a fee, or based on the payment of interest? I can see in the “Fee” section that there ...