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India’s advance pricing agreements (APAs) programme crossed a milestone with the Central Board of Direct Taxes (CBDT) signing five more unilateral APAs. With the latest move, the total number of APAs entered into by the CBDT has reached 103.
The five APAs signed on Friday pertained to diverse sector, that is, information technology, sourcing services and investment advisory services.
An APA is an agreement between a corporate taxpayer and the tax authority on its transfer pricing methodology and the tax rate applicable on inter-company transactions.
It helps avoid disputes with the tax authorities over transfer pricing. The APA scheme, which was introduced in 2012, tries to provide certainty to taxpayers in transfer pricing by specifying the method of pricing and setting the prices of international transactions in advance.
The APA scheme provides certainty in transfer pricing up to a period of nine years and helps reduce tax disputes. The rollback provisions in APA was introduced in 2014.
Of the 103 APAs signed so far, as many as 99 were unilateral and 4 were bilateral APAs. A total of 39 APAs have already been concluded in six months of this current financial year. In entire 2015-16, the CBDT had signed 55 APAs. Since its inception, the APA scheme has attracted tremendous interest among Multi National Enterprises and more than 700 applications (both unilateral and bilateral) have been filed in just four years.
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