In this case we speak of merchant trading, because:

– The supplier of the goods that will be exported is the subsidiary in India;

– The buyer of the goods to be exported is the client in Singapore;

– The merchant or the intermediary is the parent company in Germany.

Further, we don’t only speak of merchant trading when there is a subsidiary involved, but also when a company buys the products and ships to the client from a third party. For example, the German company receives an order for a specific product that it does not manufacture itself from a client in the USA. The German company places a corresponding order to a supplier in India that does manufacture the product and asks the Indian supplier to ship the goods directly to the customer in the US. The goods do not enter or leave Germany, so again the German company is the merchant trader in the example.

In this example the Indian supplier will send its invoice to the German company, who will subsequently send their own invoice to the American customer. In the example where the goods are supplied by the Indian subsidiary, the international and local transfer pricing rules apply to the sale of the goods from the Indian subsidiary to the German parent company.