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Whilst India and China have both adopted the arm’s length principle, they have always taken a distinctive approach to transfer pricing and have recently taken an active role in revising the OECD Guidelines and using other avenues, such as the UN, to press their points.

Four particular areas of distinction are discussed in the article:

  • R&D and Intangibles;
  • Local market intangibles;
  • Location specific advantages; and
  • A reluctance to rely on one-sided methods that give them little insight into profits elsewhere in the world.

With both countries regarding the BEPS project as an endorsement of their longstanding positions and a vindication of their preferred positions they have only become more confident and entrenched in their approach.

The question for taxpayers is how to navigate these local interpretations and marry them with the global rules across their business. 

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