Section 163
Section 163: meaning of "international transaction"
Section 163 is a definitions provision that underpins the whole transfer pricing chapter - it fixes what counts as an "international transaction," the trigger for arm's-length pricing rules under Section 161.
The definition
"International transaction" means a transaction between two or more associated enterprises, one of which is necessarily a non-resident, and includes a transaction in the nature of purchase, sale or lease of tangible or intangible property, provision of services, lending or borrowing money, or any other transaction having a bearing on the profits, income, losses or assets of such enterprises.
It also includes a mutual agreement or arrangement between two or more associated enterprises for the allocation or apportionment of, or any contribution to, any cost or expense incurred in connection with a benefit, service or facility provided to any one or more of those enterprises.
Why this definition matters
Whether a transaction is an "international transaction" under this section determines whether Section 161's arm's-length pricing requirement, and the associated documentation obligations under Sections 171-172, apply to it at all. It is deliberately broad - covering not just goods and services but financing, intangibles, and cost-sharing arrangements - and its scope is closely tied to the definition of "associated enterprise" in Section 162.
Frequently asked questions
Does an international transaction require both parties to be non-resident?
No - only one of the associated enterprises involved needs to be a non-resident; the other can be a resident.
Are cost-sharing arrangements between group companies covered?
Yes - the definition explicitly includes agreements between associated enterprises to allocate or apportion costs or expenses for a shared benefit, service or facility.
How does this connect to arm's-length pricing?
Section 161 requires income from an international transaction (as defined here) to be computed having regard to the arm's-length price - this section supplies the definition that triggers that requirement.
Related sections
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Get help with transfer pricing and cross-border transaction complianceLast updated 9 September 2026