International Tax: Glossary
Plain-English definitions for 10 core international tax and transfer pricing terms, with why each one matters.
Finin2min answer: These 10 terms cover the two things most international-tax and transfer-pricing questions turn on: whether India has taxing rights at all (PE, TRC, PPT, MAP) and, if so, how much profit is taxed here (ALP, AE, TNMM, APA, CbCR, MLI). Use the filter box to jump to a term.
| Term | Meaning | Why it matters |
|---|---|---|
| ALP | Arm's Length Price | The price unrelated parties would charge in a comparable transaction — the benchmark used to test whether related-party pricing shifts profit out of India. |
| AE | Associated Enterprise | Two enterprises where one participates in the management, control or capital of the other (or common persons control both) — this relationship is what triggers transfer pricing rules in the first place. |
| APA | Advance Pricing Agreement | An agreement with the tax authority fixing the transfer pricing method for specified transactions in advance, giving certainty for future years instead of litigating the same issue annually. |
| MAP | Mutual Agreement Procedure | A treaty-based process where the competent authorities of two countries negotiate to resolve double taxation or a treaty-interpretation dispute, without going to domestic courts. |
| PE | Permanent Establishment | A fixed place of business or dependent agent through which a foreign enterprise operates in India — its existence is what gives India the right to tax the foreign enterprise's business profits at all. |
| TRC | Tax Residency Certificate | A certificate from a taxpayer's home-country tax authority confirming residency there — generally required to claim benefits under a Double Taxation Avoidance Agreement. |
| MLI | Multilateral Instrument | The OECD convention that amends many bilateral tax treaties at once to implement BEPS treaty measures, instead of renegotiating each treaty individually. |
| CbCR | Country-by-Country Report | A filing large multinational groups must make, breaking down revenue, profit and tax paid by country — used by tax authorities to spot transfer-pricing risk. |
| TNMM | Transactional Net Margin Method | A transfer pricing method comparing the net profit margin earned on a related-party transaction with the margin earned in comparable unrelated transactions — the most commonly used method in practice. |
| PPT | Principal Purpose Test | An anti-abuse test (introduced via the MLI) that denies treaty benefits where obtaining that benefit was one of the principal purposes of the arrangement. |
Source discipline
This page is an editorial navigation layer. The linked official Act, rule, regulation, notification, circular, portal instruction or judgment remains controlling. Plain-English explanations here are for orientation only — the exact statutory or treaty definition governs in a specific case.