Today we have CA Vinit Gala share with us – What is Transfer Pricing(TP) and What You Need To Know To Have A Career In TP!
CA Vinit did his articleship in a small proprietary firm – Archana Gosar and Associates, Mumbai. After qualifying as a CA he specialized in Direct Taxation in a Partnership firm and later moved to a Big 4 specializing in Transfer Pricing (TP). You can read his entire journey here.
1. What is Transfer Pricing (TP)?
- In simple terms, TP means pricing of intra-company (between HO and/or branch) or intra-group (between related companies) transactions.
- Intra-company or intra-group transactions, though take place due to commercial reasons, they may also be used as a tool to shift profits from highly taxed country/territory to low tax country/territory, thereby eroding the tax-revenue base of a particular country/territory, by rigging transfer price.
- Thus, in order to keep vigil over transfer prices, TP regulations are framed by countries/territories in their respective tax laws.
- In India, TP regulations find a place in Income-tax law. Though the primary focus for vigilance is on inter-company transactions which take place cross-border, TP provisions also focus on certain domestic related party transaction to a limited extent.
- Apart from the Income-tax law, TP principles are also found in other commercial laws such as Companies Law and Customs law for different purposes.
2.If a student in CPT is aware of TP and wants to plan his/her career in TP any suggestions/tips?
- CPT (1st level CA exam) is the gateway to Chartered Accountancy course and ultimately to a CA degree. Being aware of TP at such an infancy level describes the student as an avid reader and possibly belonging to a CA family in some or other way.
- However, TP is a subject in itself, having less theory and more practicalities. Further, this arena of practice is very niche and warrants more of business viz-a-viz legal knowledge and sense.
- Thus, just having an idea about TP and deciding to make career would be like entering the one-way road, which could have no by-lanes for an easy exit.
- In view of the above, I would sincerely advise the student interested in making career in TP to pursue articleship in ‘Direct Tax’ profile where he/she gets an overall exposure (including that of TP) of important aspects such as compliance, advisory and litigation and post qualification make a choice entering into TP specialization.
3. If a CA Fresher has done most of his/her articleship in Auditing and now wants to get into TP what word of advice would you have for this CA Fresher?
- There is nothing in this world, which a CA degree holder cannot do. Though the statement sounds over-exaggeration, it should be read with a positive and practical lens.
- A fresher CA having audit exposure throughout his articleship tenure does have a positive chance to get into TP post qualification. However, good amount of efforts will be required on his part to showcase his ability, interest and theoretical knowledge at interview level (other factors such as soft skills, presentation skills etc. should also come handy).
- Further, he should be ready to compromise little a bit on his growth path since growth will be slow in initial years. However, if the ultimate goal is to get into TP then such compromise is worth it.
- I would strongly recommend reading about current Income-tax provisions on TP and articles on various TP topics by subject matter experts etc. to gain basic knowledge and to prepare for the interview.
- If he is able to crack the interview, the sky will be the limit to excel in the field.
4. If a CA with a few years in Auditing wants to get into TP (like someone who wants to take a role change) – What would you tell this person? Any advice
- My advice will more or less remain similar to the response to question no. 3. However, I would like to make one important point that probability for an opportunity for role change will start getting diminishing with an increase in audit experience years, in my opinion. Nonetheless, one may try his fortunes.
- Further, I would strongly recommend that person to undergo Diploma in International Tax offered by ICAI. Having done this course opens ups the chances of cracking interview.
5. Also if someone does not want to be a CA (like someone does not want to pursue CA degree) but wants to get into TP would he be given a chance /opportunity. If he wants such chance to be in TP – What suggestion will you give him so he/she becomes eligible.
- As mentioned somewhere above, TP requires more of a business viz-a-viz legal knowledge and sense. Thus, a non-CA does have a chance to pursue TP as a career option.
- There are non-CAs such as – B.Com graduates, MBAs, Economist graduates who are in TP and successfully managing their career.
- However, opportunities for non-CA is usually seen only in Big 4s in India, in my opinion.
- One is required to have a basic understanding of TP (through reading about TP) and basic business sense to crack interviews.
- Further, as in the case of CA from audit or non-Direct tax background, initial years of career may give slow growth.
6. How did you get into TP? Any particular reason why you chose this area of expertise?
- I started with my articleship in a proprietary small firm – Archana Gosar and Associates wherein I was acquainted and groomed in a major aspect of a traditional CA practice such as – Direct and Indirect tax, Auditing, Accounting etc. So I could say I had an overall exposure.
- However, post qualification, I had to make a choice to choose specific service line since specialization was the need of the hour back then.
- Direct Taxation was always something, which caught my interest, and thus I took up a job (post qualification) at one of the reputed CA partnership firms to excel in Direct Taxation and while on the job, I got introduced first time to TP.
7. Does TP have opportunities in different countries – if I am in India and then want to move to Australia/Canada etc will it be a big change knowledge wise or it is manageable.
- TP is an area of interest for almost all the developed as well as developing economies of the world.
- TP regulations, in fact, finds its roots in USA, Japan and other developed nations who battled with MNEs’ aggressive TP tactics to shifts profits to low tax jurisdictions.
- India is one of the nations to bring in effective TP provisions only in early 2000.
- The Indian version of TP law embraced TP laws already implemented in foreign countries and thus is in line with globally TP laws.
- Thus, global mobility DO NOT pose a great challenge as far as knowledge change is concerned.
8. Other than Big 4’s where else can one apply for TP opportunities
- Being a niche area, there are limited firms (other than Big 4’s) in India which practices TP. However, here are a few firms which have dedicated and separate TP practice (all in my opinion): 1. Dhruva Advisors 2. Nangia and Co 3. Sudit K. Parekh and Co 4. TP Ostwal and Associates
- Note: The chronology does not indicate any ranking.
9. Can a Company Secretary (CS), MBA, Graduate get into TP?
My advice will remain similar to the response to question no. 6.
10. Does one have to know any software for TP?
- Like any other field, basic knowledge of common business computer tools (such as excel, word, power-point etc.) is expected from the candidate since most of the time such tools are used for analysis and client delivery.
- Further, TP field does have specific as well as niche software (mainly third-party databases) such as Prowess, Capitaline-Neo, Bloomberg, Loan- Connector, Royalty Stat etc. which are used for the purpose of benchmarking exercise.
- However, at entry level, freshers will not be expected to know aforesaid mentioned databases. They are indeed learned on the job.
- To do or not to do something is totally one’s choice. If you like something you excel in it no matter what kind of remuneration that something gives.
- Ultimately, what matters is mental happiness and satisfaction, which is indeed the true wealth.
- Make decisions by listening to your heart, your mind will then fill it with a fragrance of happiness.
P:S: You could reach him at email@example.comfirstname.lastname@example.org