Definitions for safe harbour rules for international transactions

Key definitions.

• Accountant. An accountant under section 515(3)(b), with the same professional-experience and receipts conditions as in rule 10 (ten years' experience and annual receipts above fifty lakh rupees for an individual; entity receipts above three crore rupees for a member or partner of an entity), measured in the year before the cost certification; it also includes a person recognised for cost certification by the government of the country where the associated enterprise is registered, meeting the same conditions and, for an entity, presence of the entity or its affiliates in more than two countries.
• Contract research and development services wholly or partly relating to software development; software development services; information technology enabled services; knowledge process outsourcing services. Each is defined by a list of activities in the rule. Software development services, for example, cover business application software development using known methods, ancillary or support services for existing systems, converting computer languages, adding user functionality, debugging, adapting existing software and preparing user documentation. Both the services definitions exclude research and development services.
• Core auto components are engine and engine parts, transmission and steering parts, suspension and braking parts, and lithium-ion batteries for electric or hybrid electric vehicles. Non-core auto components are any other auto components.
• Corporate guarantee is an explicit guarantee by a company to its wholly owned non-resident subsidiary for short-term or long-term borrowing; it excludes a letter of comfort, an implicit or performance guarantee and similar guarantees.
• Data centre and data centre services are defined by reference to dedicated secure space for computing and networking equipment and the services provided through physical and IT infrastructure.
• Generic pharmaceutical drug is a drug comparable to an approved drug in dosage form, strength, route of administration, quality, performance characteristics and intended use.
• Intra-group loan is a loan to a non-resident associated enterprise that is not advanced by a financial company, bank, financial institution or enterprise lending in the normal course of business, and excludes a credit line or other facility with no fixed term for repayment.
• Low value-adding intra-group services are support services performed by group members for others in the group that are not part of the core business, not shareholder or duplicate services, need or create no unique and valuable intangibles, involve no significant risk assumption, and have no reliable external comparables — excluding research and development, manufacturing, software development, knowledge process outsourcing, business process outsourcing, purchasing of raw materials, sales and marketing, financial transactions, extraction of natural resources, and insurance.
• No tax or low tax country or territory is one where the maximum rate of income-tax is less than 15%.
• Operating expense, operating revenue and operating profit margin. Operating expense is the costs of normal operations in relation to the transaction (including stock-based compensation costs, at-cost reimbursements and depreciation), excluding interest, provisions for unascertained liabilities, pre-operating expenses, foreign-exchange losses, extraordinary expenses, losses on transfer of assets, income-tax and expenses not relating to normal operations. Operating revenue is the revenue of normal operations, excluding interest income, foreign-exchange gains, gains on transfer of assets, tax refunds, provisions written back, extraordinary incomes and other non-operating income. Operating profit margin is operating profit — operating revenue in excess of operating expense — as a percentage of operating expense.
• Relevant tax year is the tax year for which the safe harbour option is validly exercised.