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Sir if there does exist double tax treaty between a county allegedly known as tax haven and parent company’s home country, then if the parent company sets its subsidiary in that alleged tax tax haven and tries to take advantage of transfer pricing mechanisms(eg. by transferring goods at reduced rates, to save taxes at higher rates of taxation in parent’s home country and get itself taxed at lower rates of taxation through routing all its Sales via the tax haven which is known for its exceptionally low rates of taxation) then is there still a chance for the parent company to make any tax savings?
I feel that when parent company consolidates the results of the subsidiary into its own, it definitely has to pay taxes at higher rates, thus negating all its efforts to reduce taxes through transfer pricing mechanism.
In a nutshell for transfer pricing mechanism to work and be exploited by a Parent company there should not be any double tax treaty between the parent and subsidiary company’s respective countries, right sir?
Although consolidated accounts are required under financial accounting rules if one company owns more than 50% of another, there is no new legal entity.
It is the individual companies that are taxed on their individual profits.
Only remittances from the subsidiary form part of the taxable profit of the parent.
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