The tax authority is set to crack down on tax evasion and controversial fund transfers by foreign companies through transfer pricing from next fiscal year by implementing a rule for it.
Transfer pricing is an accounting method which allows multinational companies to shift net profits or losses to offshore or low-tax countries to maximise their earnings.
For instance, two subsidiaries of a company, one based in a high-tax country and another in a low tax haven, can engage in trade with one another.
The low-tax subsidiary can quote abnormally high prices from the high-tax subsidiary for goods/services to manage the maximum after-tax profits for the parent company, an unethical practice which many multinational firms resort to.
Dubbed the transfer pricing rule, it stipulates that multinationals or foreign companies furnish statements certified by chartered accountants of transactions above Tk 3 crore with their related or associated entities abroad.
The rule, which is included in the Finance Bill 2014, will take effect from July, said a senior official of the National Board of Revenue.
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