Accretive Business Consulting (Accretive), a Bangalore-based business consulting firm has entered into an alliance with Amsterdam-headquartered Transfer Pricing Associates (TPA), a leading independent provider of global transfer pricing and valuation services for the pharma-biotech sector.

Currently the concept of ‘Transfer Pricing’ plays a key role in the pharma sector because it is an indispensable component in exports and contract research-manufacture services.

India is experiencing the maximum litigation on transfer pricing matters. Therefore this alliance will provide best practice design and documentation of transfer pricing systems. It will offer benchmarking services, proactive tax and transfer pricing audit defense strategies using an efficient and cost-effective approach to service the entire spectrum of companies including pharma-biotech industry, said Vishnu Bagri, co-founder, Accretive.

The TPA has a network of professionals in over 30 jurisdictions. “We would now leverage the global best practices for the benefit of our clients. Further, we are also evaluating the possibility to open a Centre of Excellence in Bangalore for Transfer Pricing,” he added.

Transfer Pricing controversies and price setting issues are probably the most important tax issue for global managers. India has been on the forefront with the high tax demands slapped on companies with cross-border related party transactions, Steef Huibregtse, founding member, TPA.

According to Bagri, Indian Transfer Pricing authorities are rated among the top ten toughest tax authorities. In recent audits, the Indian revenue authorities are seen to be adopting an increasingly aggressive approach on TP-related issues.

Currently, the Indian pharma-biotech industry is facing issues in TP because much of the value in the average business lies in intangible assets which are difficult to value. This in turn has led to disputes over cross-border development or licensing arrangements. Further the Indian TP regulations do not include ‘Business Strategies’ as a factor of comparability. Recognition of business strategies, would allow a proper characterization of the operations and a fair allocation of the revenue, he said.

Going forward, it is vital the Indian authorities take a suitable stand towards creation of marketing intangibles and profit attribution for the pharma and biotech industry.

Between 2001 and 2009, the administration on TP in India registered losses to the tune of around Rs 25,000 crore. Now the industry is pressing the government to introduce Safe Harbours and suitable Advance Pricing Arrangements(APA). For transactions involving import of products, there is a need for agreement amongst the regulatory authorities monitoring transfer pricing, customs and controlling drug prices. Since APA and TP are a proactive mechanism, it provides the advantage of certainty and tax risk management when a company pursues its global business opportunities. The tax risks associated with intangibles are complex. This is where the APA and TP will be able to provide a stable environment for the companies to deal with real-time issues and eliminate the possibility of juridical or economic double or non taxation, he said.