The NBR’s Arm’s Length Principle

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Expert Advise For NBR’s Arm’s Length Principle

NBR’s Arm’s Length Principle: The  National Board of Revenue stated that arms length charges should be levied for services rendered between the parties concerned, comparable to services rendered between unrelated parties in similar situations.
The NBR’s Arm’s Length Principle

Routine Support Services For NBR’s Arm’s Length Principle

If the NBR e-Tax Guide lists the routine support services in the “Transfer Pricing Guidelines”, the service provided within the group concerned is ready to accept the cost of the routine support service and 15% mark up. It is provided that routine support services are provided only to the parties concerned and all costs related to routine support services are taken into account in the calculation of 15% mark-up.

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Cost-Pooling Arrangements In Compliance With NBR’s Arm’s Length Principle
The NBR is prepared to acknowledge that the services are provided free of charge if routine support services are provided to the parties concerned without any mark-up and there is a cost-pooling arrangement between them. The following conditions must be met:
1. Part of each participant’s expenses must be borne in the form of cash or other financial contributions.
2. Services are not provided to any unrelated party.
3. The provision of services is not the main activity of the service provider. If the cost of providing the service does not exceed 15% of the total cost of the service provider for that financial year, the provision of the service will not be considered as its main activity;
4. The services are listed in the e-Tax Guide “Transfer Pricing Guidelines”; And
5. There are documents that show that the parties wanted to enter the cost pooling system before the provision of services.

Strict Cross Costs With Our NBR’s Arm’s Length Principle Advisory

Bangladesh Taxpayer can act as a payment agent for the services provided by the service provider (whether independent or related) to the concerned party of the Bangladesh taxpayer. When a Bangladeshi taxpayer pays the service provider and charges these costs to the party concerned, the NBR is prepared to treat these costs as a strict pass-through cost and does not accept any mark-up on subsequent charges if all of the following conditions are met:
1. The services rendered by the service provider for which the taxpayer of Bangladesh passes the relevant expenses are for the benefit of the party concerned.
2. The service provider charges a hand-length fee for the services rendered;
3. Taxpayers in Bangladesh do not simply increase the value of services provided by paying agents and service providers; And
4. The parties concerned are legally or contractually liable for the payment of costs. This condition can be met, although the taxpayer of Bangladesh is legally or contractually liable for the services provided, but it has a written agreement with the party concerned to subsequently assume the liability related to them.

Applying The NBR’s Arm’s Length Principle To Related Party Loans

When you apply the arm length policy, the interest rate on the respective party loans should be set which reflects the rate charged between the unrelated parties in similar situations. Claims on NBR loans will limit the cost of interest where both the payer and the borrower are taxpayers in Bangladesh. Loans must be made interest-free or at interest rates that are not supported by transfer price analysis. This practice will not apply if the lender is in the business of borrowing funds and lending in which case the arm length policy must be adhered to. Also, if the debt of the party concerned is a cross-border debt, the taxpayers should ensure compliance with the arm length policy.

FAQ For The NBR’s Arm’s Length Principle

How do you prove NBR’s Arm’s transactions?

Both the buyer and the seller are independent, entitled to equal bargaining power, not under pressure or pressure. The contract law, on the part of the opposition, and in their own interests to achieve the most profitable contract.

What is a Arms-length transaction for tax purposes?

In real estate transactions, tax laws are set to ensure that sellers pay a fair tax value despite receiving fewer offers. In an arms transaction, the seller must pay tax on the sale of the home as if they had sold it. Instead of a discounted price to a neutral party at a fair market price.

What is the key to the principle of arm's length?

NBR’s Arm’s Length Principle : The key to applying the principle of arm length is comparability. But how do we make sure that one transaction is comparable to another? The first point is that a comparative transaction must occur between independent parties. This means that in many cases, a competitor cannot make a comparative representation.

What should be the Arms length of the transaction of the party concerned?

When disclosing the information of the party concerned, do not say or imply that the transactions were on the basis of Arms length, unless you can prove the claim.

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