@pkeday
You are right about the tax benefit AICL as a group is getting because they set up a company in UAE. It is a smart move. But it much more smarter move than it appears. Why? The answer to this question will also answer the query you are struggling to solve.
You are not able to find the payment by parent to UAE subsidiary because the transaction is structured in the following way.
- Bitumen Supplier will provide bitumen to AICL. So, the Bitumen Supplier will raise invoice on CIF basis to AICL.
- AICL Overseas will provide the ship chartering service to Bitumen Supplier. AICL Overseas will raise an invoice for freight and other charges to Bitumen Supplier.
So, legally there is no transaction for freight between AICL and AICL Overseas. By structuring the transaction in such manner, the company has avoided the income tax as well as the transfer pricing police. You can cheer for the management here.
Now, with regard to your suspicion of overstatement of profit in UAE Entity, the management’s ability to park higher profits in UAE depends upon their relationship with the bitument suppliers, which are few as highlighted by @Rhythm on the basis of Credit Rating Agency report.
I hope your doubt is clear now.
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