What are the new provisions related to taxation of international transactions and transfer pricing introduced in the recent direct tax legislation?

New Provisions Related to Taxation of International Transactions and Transfer Pricing

In the recent direct tax legislation, several new provisions have been introduced regarding the taxation of international transactions and transfer pricing. These provisions aim to ensure fair taxation and prevent tax evasion in the context of cross-border transactions. Some key changes include:

1. Introduction of a 'secondary adjustment' mechanism to align the profits of a taxpayer with the arm's length price in transfer pricing cases.
2. Implementation of country-by-country reporting requirements for multinational enterprises to enhance transparency in reporting of income, taxes paid, and economic activities.
3. Strengthening of the documentation requirements for transfer pricing compliance to provide tax authorities with more detailed information on related-party transactions.
4. Enhanced penalty provisions for non-compliance with transfer pricing regulations to deter avoidance and manipulation of profits through cross-border transactions.
5. Introduction of safe harbor provisions to simplify transfer pricing compliance for small and medium-sized enterprises engaged in international transactions.

These provisions mark a significant shift towards greater scrutiny and regulation of international transactions and transfer pricing to ensure greater tax fairness and compliance in the global business environment.