NBR building up profiles of MNCs

National Board of Revenue is building up profiles of the multinational companies operating in the country for the purpose of conducting audits on the MNCs’ accounts to prevent tax evasion through misuse of transfer pricing system.

Transfer Pricing Cell (TPC) of NBR is also conducting risk assessment of the companies’ accounts, officials said.

They said that TPC was doing the activities as preparation for the start of auditing tax files of MNCs within this year under the TP law.

TPC has already carried out many programmes to aware and motivate the MNCs to ensure voluntary compliance with the law, they said.

Transfer pricing takes place when a MNC pays or gets payment for purchase or sales or transfer of any tangible or intangible output to any of its associate or subsidiary company in which the MNC has substantial interest in any form.

There are allegations that many MNCs evade tax by misusing the transfer pricing system through over-invoicing and under-invoicing during transactions of goods and services within their associate companies.

A senior transfer pricing official on Monday told New Age that they were building up the MNC profiles that would contain functional and business identify of an MNC, type of its business, details of its accounts and cross-border transactions.

Under risk assessment, TP cell is also analysing the statements of international transactions of the MNCs to find out risk factors like total cross-border transactions, percentage of transactions under TP law, types of intra-group services, rates of payment for the services and payment of various fees like royalties and licence fees.

Based on the risk factors, TP officials will select MNCs for audit, the official said.

In addition to that, NBR has moved to improve capacity of tax officials so that they could properly enforce the transfer pricing law and check tax evasion by the MNCs through TP methods or cross-border transactions.

NBR with technical support of the Netherlands government will arrange a training programme for 25 tax officials on TP issues.

Currently, eight dedicated transfer pricing officers (TPOs) are working with the TP cell.

It will be a three-four months online training to be started next week.

Tax officials will be taught advance technique, international tax planning, comparative analysis in TP and other emerging issues to make them equipped with how to detect tax evasion by the MNCs misusing transfer pricing system.

International Bureau of Fiscal Documentation of Netherlands will provide the training in cooperation with the country’s Tax and Customs Administration and foreign affairs ministry.

NBR framed the TP law in 2012 and formed the TP cell in 2014.

Seven MNCs including a mobile operator, four readymade garment companies and a branch office of global brand in the electronic sector, in the current fiscal year 2018-2019 voluntarily paid additional Tk 10 crore in taxes to NBR after checking their cross-border transactions following the transfer pricing guidelines of the cell.

According to NBR, nearly 1,000 MNCs including branch, liaison and representation offices operate in the country.

Of them, only 120-130 companies regularly submit their statements of international transactions (SIT) to NBR.