Transitioning from FAR to FARM analysis

India & many developing countries have traditionally been strong advocates of source based taxation. In the context of transfer pricing, the spirit of OECD's guidelines in terms of "Functions Assets and Risk" (FAR) Analysis have been practiced and reliance thereon is also upheld by the Indian Courts in many rulings. 

Developing countries like China or India have been advocating expanding the scope of profit attribution in source jurisdiction, based on not just FAR analysis but also considering the 'market' analysis, also referred to as FARM analysis. A renewed focus on 'value creation' post BEPS is accompanied by even stronger consideration of demand side factors in the TP analysis in some of the developing jurisdictions.  This is also accompanied by the debate on whether ‘OECD Authorized Approach (AoA)’ using just FAR is adequate, especially in the context of digital economy taxation. While this debate is immediately relevant in the context of digital economy, the fundamental principles relating to FAR versus FARM analysis and AoA approach are also relevant in the context of transfer pricing. 

Do you believe that market jurisdictions which create ‘value’ should be remunerated in addition to the outcome of FAR analysis? Will ‘profit attribution’ considering demand side factors be an appropriate solution for digital as well as traditional economy business models? Are these approaches in line with OECD's work on BEPS Action 8-10?

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