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Multinationals have cause for cheer as the Central Board for Direct Taxes (CBDT) has announced the much awaited ‘rollback’ rules for advance pricing agreements, bringing certainty to their tax liability for as many as nine years.
Under the rollback facility, the pricing agreed in an APA (advance pricing agreements) for future transactions (maximum for five years) may be applied to transactions for previous four years in specified circumstances.
An APA is an agreement between a taxpayer and the tax authority concerning the transfer pricing method and the rate applicable to the taxpayers’ inter-company transactions, and normally covers multiple years.
The Finance Minister Arun Jaitley had, in his maiden Budget in July last year, announced that the facility of ‘roll back’ would be extended under the APA scheme.
With this move, taxpayers would not only be able to ascertain their tax liability in advance, but also use that principle for past years.
For example, if the applicant files an APA application on or before March 2015 covering a period of up to five years from financial year 2015-16 to financial year 2019-20 and applies for a roll back, the roll back years can cover the period from fiscal 2011-12 to 2014-15. Reacting to the CBDT move, SP Singh, Senior Director, Deloitte in India, told BusinessLine that the APA rollback rules are a very positive development which would go a long way in reducing transfer pricing litigation and encouraging investments in India.
‘Positive development’ Rohan Phatarphekar, Head of Transfer Pricing, KPMG in India, said it is encouraging to see the Government give an option to roll-back APA terms to all taxpayers — even those who have already filed for APAs in the past or the handful of taxpayers who had already signed APAs with the Government
Aseem Chawla, Partner, MPC Legal, a law firm, said the prescriptive regulations announced with regard to APA roll back are quite detailed in nature.
The rules provide the window of making applications by March 31, 2015 in respect of APA applications concluded or filed before January 1, 2015, he said.
Welcoming the CBDT move, Samir Gandhi, Partner, Deloitte, Haskins & Sells, said that one can opt for roll back provisions only with respect to same international transactions covered in the forward looking agreement.
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