Aabid and Co’s Post

Time for #Transfer pricing compliances #TP #compliance #deadline of October 31 is fast approaching & companies to be ready for filing #Form 3CEB, Maintaining TP #documentation, filing #CbC notification (if parent entity follows calendar year), and submitting #Masterfile notification. Masterfile filing & safe harbour form is due by the end of November 2024 1.     Form 3CEB – Critical pointers  Form 3CEB requires precise disclosure of international transaction &SDT between AEs. Simply relying on AS18 for RPT disclosures is insufficient, as both conditions under sections 92A(1) & 92A(2) must be satisfied. Deemed AEs & Deemed transactions are often overlooked & hence identification is the key. Evaluate hidden transactions – e.g free-of-cost assets from the AE require evaluation for disclosure, considering their implications as notional costs and GST treatment. The issue of shares, while not classified as an international transaction by the Supreme Court, still demands careful disclosure due to the form's lack of updates. Additionally, interest-free loans/ corporate guarantees from Indian HQ to AEs to be assessed if they are quasi equity/shareholder activities and hence there was no compensation. Changes in FAR profile & characterization of the assessee to be evaluated under Business restructuring. Overall, these transactions require thorough evaluation & disclosure to ensure #compliance with ALP standards. Distinction between services & reimbursements is critical. Understanding nature of transaction is vital. For instance, when an AE reimburses the salary costs of Indian employees, it may indicate that these employees are providing services such as sourcing or marketing for the AE, rather than simply being in nature of reimbursement. As a result, pricing for these transactions should be reevaluated, focusing on the transaction's nature instead of solely relying on the pricing policy. Lastly, companies with Service charges, royalty payments, & management fees to prove need benefit test and maintain cost allocations, and pricing justification. 2.     Time for action  Crucial time for companies to evaluate the need if any for a suo moto adjustment if an international transaction is not at arm’s length post book closure. Companies can voluntarily adjust their transfer price to comply with the arm’s length principle in the IT return, which may increase their income or reduce losses. For those opting for safe harbour, if their margins fall short of the targeted margins, then decision for suo moto adjustment to meet the safe harbour margins needs to be made before filing the 3CEB. 3.     Foreign entities Compliances A foreign entity with income accruing or arising in #India and a registered PAN in India is required to file Form 3CEB. Foreign entities must maintain their own transfer pricing documentation and cannot depend on those prepared by their Indian subsidiaries. Do connect with VSTN Consultancy Private Limited for TP solutions # tax

⛳️FCA fines CEO of the remittance #fintech #Wise £350,000 for senior manager conduct failure The FCA has fined Kristo Käärmann, the CEO of Wise plc and senior manager of Wise Assets UK Ltd, £350,000 for breaching a senior manager conduct rule. Wise is a multi-currency payment and banking system which claims 16m customers worldwide. Its Wise Assets arm also provides an investment service allowing customers to invest in stocks and shares. In February 2021, Käärmann paid a significant fine to HM Revenue & Customs (HMRC) of £365,651. He was fined for deliberately failing to notify HMRC of a capital gains tax liability after he sold shares worth £10m in 2017. In September 2021, HMRC subsequently added Käärmann to their public tax defaulters list. Between February 2021 and September 2021, these matters, including the circumstances surrounding them, were relevant to the FCA’s assessment of Käärmann’s fitness and propriety. Käärmann failed to appropriately consider the significance of the tax issues and notify the FCA, despite being aware of them for over 7 months. Therese Chambers, joint executive director of enforcement and oversight said: “We, and the public, expect high standards from leaders of financial firms, including being frank and open. “It should have been obvious to Mr Käärmann that he needed to tell us about these issues which were highly relevant to our assessment of his fitness and propriety.’ Käärmann would have been fined £500,000, but he agreed to resolve these matters and so qualified for a 30% discount. The FCA issued the fine after determining that Käärmann was in breach of Senior Management Conduct Rule 4, which states: ‘You must disclose appropriately any information of which the FCA would reasonably expect notice.’ The FCA’s Senior Managers and Certification Regime aims to reduce harm to consumers and strengthen market integrity by creating a system that enables firms and regulators to hold people to account. https://lnkd.in/dE6dhA-9

Accountants should not be required to complete these wholesale client certificates as they shift the risk from the adviser or product provider to the accountant.   I spoke to an accountant last week who refuses to sign these certificates under any circumstances due to the risks involved. In my case, I will only sign a certificate where the client has gross income for each of the last 2 financial years of at least $250,000.   There is more risk in determining if the client has net assets of at least $2.5M. This would require us to firstly sight documentation proving ownership and then determining the value of the assets Plus we have to check if the assets are encumbered and then obtain loan statements to determine outstanding balances.    I think that most clients would not be prepared to pay their accountant in excess of $1,000 for this due diligence. Accordingly, we should not be put in a difficult situation in the first place by being asked by our clients to complete these certificates.    ASIC should be going after the product providers who are promoting the risky products instead of chopping the low hanging fruit – being the accountant.   It’s no different when banks and finance brokers ask us to assess the credit worthiness of a client applying for a bank loan.    If you are not following my business profile Australianbiz, I would be grateful if you could hit the Follow button as we also post content for accountants, tax, and business advisors. Please also visit our website, www.australianbiz.com.au, which has plenty of handy resources for accountants, bookkeepers and SME advisors, including monthly SME tax updates.  

Day 59 of learning about trade finance series Today subject is : The form of indemnity ( Shipping grantee ) : Although most carriers maintain their own standard forms, its content will differ from carrier to carrier and common features, as follows: 1. The form is pre-printed with the heading of the carrier. 2. It will indicate that it is an indemnity containing an undertaking in connection with delivery of the described goods without production of an original bill of lading. 3. The applicant and issuing bank, both may sign the indemnity (in the case of an indemnity issued directly by the bank, only the bank will sign), who will undertake: a. To indemnify the carrier and hold it harmless in respect of any liability, loss or damage of whatsoever nature that it may sustain by delivering the goods as requested. b. to provide funds to defend any action brought against the carrier. c. to pay on demand any freight and / or charges due on the goods. d. to surrender an original bill of lading as soon as it is received. A carrier's indemnity form may indicate that the incorporation of an expiry date or any qualifying remarks is not acceptable. The following particulars are typically shown: a. Consignee b. Vessel and voyage number c. Bill of lading number d. Quantity and description of goods / container numbers e. Amount To countersign or issue an indemnity, an issuing bank will normally:- a. Require the applicant to sign its own form of indemnity in favour of the bank b. It should include the applicant's undertaking to accept the documents as presented, irrespective of any discrepancies c. It should contain an irrevocable authority for the bank to debit the applicant's account The risks to an issuing bank, in addition to those already detailed, are that: a. Normally no date limitation of the bank's liability; the applicable law of limitations, for most countries, would be a minimum of six or seven years b. The liability may be unlimited in amount, accordingly, banks take cash deposit to cover at least the invoice value plus a margin. #TradeFinance #DocumentaryLetterOfCredit #Banking #Finance #Accounting

Brazilian Receivables Funds (known as #FIDCs), financial institutions and other investors acquire and advance more than BRL100 billion in trade #receivables annually. Feijó Lopes Advogados #DistressedAssets and #SpecialSituations team identified the following 5 key points in the acquisition of receivables by Brazilian and foreign investors: #1. Do Due Diligence on Receivables to be Prepaid: FIDCs, financial institutions, and investors acquire receivables performed (the majority) or to be performed. With regard to “performed”, the investor must (i) confirm that the seller is the legitimate holder of the receivables, (ii) review the documentation that supports the credit rights, such as commercial contract and invoice issued, and (iii) confirm with the debtor of the receivables that they are owed and there is no commercial dispute between the supplier and the debtor. #2. Specify the Underlying Receivables in the Purchase Agreement: The Receivables Purchase Agreement must provide for the main specifications of the receivables, in order to individualize them and, thus, ensure their right of assignment vis-à-vis the supplier, the debtor and third parties. For continuous receivables assignment programs, details of the receivables to be assigned should preferably be attached to the Receivables Purchase Agreement, which may be updated or replaced as new receivables are negotiated. #3. Notify and Obtain Acknowledge from the Debtor Regarding the Assignment of Receivables: This is one of the crucial points in the acquisition and anticipation of credit rights in Brazil. Observe the rules of art. 290 of the Brazilian Civil Code, which requires that the debtor of the assigned receivable be notified of the assignment and declare that it is aware of it. According to market practice and caselaw, the format of notification and acknowledgment of the debtor may occur in various ways, but within accepted limits. #4. Ensure the Right of Recourse in Key Situations: Although the advance of receivables is commonly signed without recourse against the seller, the investor must ensure the right of recourse against the seller if (i) there are defects in the documentation, (ii) there is a dispute with third parties over their ownership, (iii) if there is a commercial dispute over the receivables, among other events. #5. Protect Your Assignment of Receivables: In addition to notifying and informing the debtor of a specific assignment of receivables, consider registering the Receivables Purchase Agreement with the Brazilian Registry of Titles and Deeds of the seller's jurisdiction. Although it is not a condition for the validity of the assignment, registration will publicize the assignment in the face of third-party disputes. The above points of attention are important to be considered by investors in credit rights, aiming to mitigate some of the main risks involved in a market with great opportunities. #privatecredit #brazil #funds

Brazilian Receivables Funds (known as #FIDCs), financial institutions and other investors acquire and advance more than BRL100 billion in trade #receivables annually. Feijó Lopes Advogados #DistressedAssets and #SpecialSituations team identified the following 5 key points in the acquisition of receivables by Brazilian and foreign investors: #1. Do Due Diligence on Receivables to be Prepaid: FIDCs, financial institutions, and investors acquire receivables performed (the majority) or to be performed. With regard to “performed”, the investor must (i) confirm that the seller is the legitimate holder of the receivables, (ii) review the documentation that supports the credit rights, such as commercial contract and invoice issued, and (iii) confirm with the debtor of the receivables that they are owed and there is no commercial dispute between the supplier and the debtor. #2. Specify the Underlying Receivables in the Purchase Agreement: The Receivables Purchase Agreement must provide for the main specifications of the receivables, in order to individualize them and, thus, ensure their right of assignment vis-à-vis the supplier, the debtor and third parties. For continuous receivables assignment programs, details of the receivables to be assigned should preferably be attached to the Receivables Purchase Agreement, which may be updated or replaced as new receivables are negotiated. #3. Notify and Obtain Acknowledge from the Debtor Regarding the Assignment of Receivables: This is one of the crucial points in the acquisition and anticipation of credit rights in Brazil. Observe the rules of art. 290 of the Brazilian Civil Code, which requires that the debtor of the assigned receivable be notified of the assignment and declare that it is aware of it. According to market practice and caselaw, the format of notification and acknowledgment of the debtor may occur in various ways, but within accepted limits. #4. Ensure the Right of Recourse in Key Situations: Although the advance of receivables is commonly signed without recourse against the seller, the investor must ensure the right of recourse against the seller if (i) there are defects in the documentation, (ii) there is a dispute with third parties over their ownership, (iii) if there is a commercial dispute over the receivables, among other events. #5. Protect Your Assignment of Receivables: In addition to notifying and informing the debtor of a specific assignment of receivables, consider registering the Receivables Purchase Agreement with the Brazilian Registry of Titles and Deeds of the seller's jurisdiction. Although it is not a condition for the validity of the assignment, registration will publicize the assignment in the face of third-party disputes. The above points of attention are important to be considered by investors in credit rights, aiming to mitigate some of the main risks involved in a market with great opportunities. #privatecredit #brazil #funds

𝐇𝐢 𝐀𝐮𝐝𝐢𝐭𝐨𝐫𝐬!! 🙃 𝐈'𝐦 𝐠𝐨𝐢𝐧𝐠 𝐭𝐨 𝐠𝐢𝐯𝐞 𝐲𝐨𝐮 𝐬𝐨𝐦𝐞 𝐜𝐡𝐞𝐜𝐤𝐩𝐨𝐢𝐧𝐭𝐬 𝐲𝐨𝐮 𝐧𝐞𝐞𝐝 𝐭𝐨 𝐥𝐨𝐨𝐤 𝐟𝐨𝐫 𝐰𝐡𝐞𝐧 𝐲𝐨𝐮 𝐚𝐮𝐝𝐢𝐭 𝐲𝐨𝐮𝐫 𝐫𝐞𝐜𝐞𝐢𝐯𝐚𝐛𝐥𝐞𝐬 𝐛𝐚𝐥𝐚𝐧𝐜𝐞𝐬: 𝟏. 𝐂𝐚𝐭𝐞𝐠𝐨𝐫𝐢𝐞𝐬: It's first important to categorize our transactions in different categories, like Trade Receivables, Advances from Customers, Related Party Transactions, Interbranch Transactions, etc. 𝟐. 𝐀𝐠𝐞𝐢𝐧𝐠 𝐑𝐞𝐩𝐨𝐫𝐭𝐢𝐧𝐠: Auditor needs to ask for Account Receivable Ageing Schedule which shows outstanding invoices and their due dates. For example: Not due, 0-30 Days, 30-60 Days, 60-90 Days and more than 90 Days. 𝟑. 𝐈𝐝𝐞𝐧𝐭𝐢𝐟𝐲𝐢𝐧𝐠 𝐭𝐡𝐞 𝐌𝐒𝐌𝐄𝐬 𝐚𝐧𝐝 𝐍𝐨𝐧 𝐌𝐒𝐌𝐄𝐬: Auditor have to identify the MSMEs and Non MSMEs and observe the overdues more than 45 days. Section 23 of MSMED Act has specifically prohibited the assesses from claiming the deduction from the income on account of interest paid to MSME. 𝟒. 𝐕𝐨𝐮𝐜𝐡𝐢𝐧𝐠: Auditor need to verify the documents such as Invoices, Bill of lading, Cash receipts, Credit Memos etc. 𝟓. 𝐅𝐨𝐫𝐞𝐱 𝐄𝐟𝐟𝐞𝐜𝐭 𝐨𝐧 𝐓𝐫𝐚𝐧𝐬𝐚𝐜𝐭𝐢𝐨𝐧𝐬: Balance sheet values can fluctuate due to fluctuations in foreign exchange rates. Profit and loss on foreign transactions has to be booked, i.e. the difference between Restated balance (exchange rate as of year end) and transaction balance (exchange rate at which it is booked). 𝟔. 𝐑𝐞𝐥𝐚𝐭𝐞𝐝 𝐏𝐚𝐫𝐭𝐲 𝐓𝐫𝐚𝐧𝐬𝐚𝐜𝐭𝐢𝐨𝐧𝐬: In Section 188, there's a requirement to disclose the RPT. 𝟕. 𝐄𝐱𝐭𝐞𝐫𝐧𝐚𝐥 𝐁𝐚𝐥𝐚𝐧𝐜𝐞 𝐂𝐨𝐧𝐟𝐢𝐫𝐦𝐚𝐭𝐢𝐨𝐧𝐬: Auditor has to confirm the amount unpaid as of the end of the Reporting period and reconcile the differences if any. 𝟖. 𝐓𝐫𝐞𝐧𝐝 𝐀𝐧𝐚𝐥𝐲𝐬𝐢𝐬: Auditor may Review the trend line of Sales and Account Receivables or may compare the collection period. 𝐍𝐨𝐭𝐞: 𝐓𝐡𝐞 𝐟𝐨𝐥𝐥𝐨𝐰𝐢𝐧𝐠 𝐩𝐨𝐢𝐧𝐭𝐬 𝐚𝐫𝐞 𝐛𝐚𝐬𝐞𝐝 𝐨𝐧 𝐦𝐲 𝐮𝐧𝐝𝐞𝐫𝐬𝐭𝐚𝐧𝐝𝐢𝐧𝐠, 𝐛𝐮𝐭 𝐭𝐡𝐞𝐫𝐞 𝐦𝐢𝐠𝐡𝐭 𝐛𝐞 𝐚 𝐟𝐞𝐰 𝐦𝐨𝐫𝐞 𝐭𝐨 𝐜𝐨𝐧𝐬𝐢𝐝𝐞𝐫.

An overall check list for all types of Contracts.[1] Relationship of the Partners -         Signatories authenticated. -         Corporation documents viewed. -         Address and contact details compliancy checked. -         ………….. Price/Consideration -         Amount of Contract same as acknowledged offer. -         Consideration fund validated. -         Figure and wording of contract amount are same. -         …… Payment Terms -         A portion of payment hold till receive originals, through CAD[2] payment. -         Copy of shipping documents received by email. -         Advance payment conforms against pay order/ draft/ promissory note/check note/… acceptable. -         …… Payment through credit: -         Issuance bank confirmed. -         Conditions of operative -         Discrepancies of LC [3]text and Contract checked -         ……. Duration, Commencement date and Effectiveness -         Effective date equals with date of signing and notification. -         Pre-conditions of contract commencement checked, -         Duration of contract conforms with local calendar. -         …….. Guarantees/Securities -         APG/PBG/RMG[4] components form formally checked, -         Items of unconditionally/on demand and independency of guarantees approved. -         Securities compliance with duration. -         ……… Governing law and settlement of disputes -         Care the durations of disputes to be registered from the beginning. -         Care the investigation to settlement to be bound by a period. -         Care that the arbitration out of conciliation ADR[5] shall be affordable. -         ……………. Deductions (taxes, duties, levies) -         Tax and duties are accordance with sales proposal. -         Demurrages and liquidated damages to be included in its related article. -         Commission and banking charges also mentioned in payment terms article. -         ……… Prepared by: Mustafa Arablou [1] This check list is a specimen for main issues of contract, a dedicated list that meets your needs, takes time. [2] Cash against documents, a method of payment on which bank has neutral role. [3] Letter of credit or documentary credit, on which the issuing bank committed to pay against presentation. [4] Advance Payment Guarantee/Performance Bond Guarantee/Retention Money Guarantee. [5] Alternative dispute resolution.

The ATO’s Serious Financial Crime Taskforce is sounding the alarm on ‘false invoicing’. These arrangements involve invoices being issued for non-existent services, leading to illegal claims for income tax deductions and GST credits. 🔍 What's Happening? False invoicing arrangements can look like this: 💰An entity (the promoter) issues invoices to a legitimate business, but no goods or services are provided. 💰The business pays the invoices, and the promoter returns most of the money to the business owners as cash (who do not report this in their tax returns). 💰The promoter keeps a small commission while the business illegally claims deductions and GST input tax credits from the false invoice. The Risks: ❌Hefty penalties and interest. ❌Criminal investigations. ❌Damage to business reputation. More information can be found in the link below.

Under IFRS 15, the primary distinction between contract assets and trade receivables, as well as between contract liabilities and trade creditors, lies in the specific conditions and timing of customer obligations and company performance. Let’s break down these differences. 1. Contract Asset vs. Trade Receivable Contract Asset: A contract asset arises when a company has performed its obligations under the contract (e.g., delivered goods or provided services) but does not yet have an unconditional right to payment because some criteria (such as formal customer acceptance) are still pending. Recognition of a contract asset reflects work done that is not yet billed but is expected to be recoverable upon meeting further contract terms. Trade Receivable: A trade receivable, on the other hand, is recorded when the company has an unconditional right to payment (i.e., payment is due solely based on the passage of time and is not dependent on further performance obligations). It represents amounts invoiced and due from customers after the company has satisfied the necessary criteria under the contract. Key Difference: The core difference is the level of control over the payment. For a trade receivable, the company has an unconditional right to receive cash. For a contract asset, the right to receive cash is conditional on further performance or events. 2. Contract Liability vs. Trade Creditor Contract Liability: A contract liability is recognized when the company receives payment from a customer in advance of fulfilling its performance obligations (such as receiving payment for services or goods to be provided in the future). This advance payment represents an obligation to deliver goods or services to the customer, making it a “deferred revenue” item. Trade Creditor (Trade Payable): A trade creditor is a liability arising from goods or services that the company has already received, with an obligation to pay the supplier at a later date. Unlike contract liabilities, trade creditors typically relate to purchases the company has already received and not to obligations tied to future performance. Key Difference: Contract liabilities are obligations to provide goods or services in the future based on customer prepayment, whereas trade creditors are obligations to pay for goods or services the company has already received.