Safe Harbour means the circumstances in which the income-tax authorities accept the transfer price declared by assessee. Draft Safe Harbour Rules were placed in public domain on 14.08.2013 for seeking comments from various stakeholders. After receiving their inputs Safe Harbour Rules (‘SHRs’) have been finalized. The gist of modifications incorporated in the final Safe Harbour Rules are as under:
1) The SHRs shall be applicable from the assessment year 2013-14 for five assessment years. An assessee can opt for the safe harbour regime for a period of his choice but not exceeding 5 assessment years;
2) Earlier ceiling of Rs 100 crores has been removed for transactions in the nature of routine ITES/ITS, corporate guarantees and KPO;
3) Routine IT/ITES transactions have been provided safe harbour margin of 20% for transactions up to 500 crores and 22% for transactions above Rs.500 crores;
4) On corporate guarantees reduced safe harbour margin of 1.75% is applicable for transactions above Rs 100 crores if wholly owned subsidiary has been rated to be having adequate to highest safety norms by rating agency;
5) The definition of KPO has been rationalized to provide a reasonable distinction from routine BPO activity and its safe harbour margin has been reduced from 30% to 25%;
6) Once the option exercised by the assessee is held as valid it shall remain so for the opted period unless the assessee voluntarily opts out of safe harbour regime by furnishing a statement to this effect to the Assessing Officer;
7) The assessee is required to submit a statement regarding the quantum of international transactions, its nature, the operating margins, etc., for the period for which safe harbour option is exercised;
8) The option exercised by the assessee can be held as invalid subsequently if there is change in the facts and circumstances relating to the eligibility of the assessee or in international transaction.
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