Government signs 11 unilateral Advance Pricing Agreements

The Central Board of Direct Taxes signed 11 unilateral APAs on 28th March, 2016. With this signing, India has entered into 59 bilateral and/or unilateral APAs.

About APA's:

  • The Advance Pricing Agreement (APA) programme was introduced by the Finance Act, 2012 to provide a predictable and non-adversarial tax regime and to reduce litigation in the Indian transfer pricing regime.
  • An Advance Pricing Agreement, or APA, is essentially a negotiated deal between a taxpayer and the tax authorities that sets out beforehand the method for determining the transfer pricing pertaining to transactions between a subsidiary and its foreign parent.
  • This relates to the pricing of assets, tangible and intangible, services, and funds that are transferred within an organisation in a cross- border transaction.
  • The agreements cover a range of international transactions, including corporate guarantees, royalty, software development services, IT enabled services and trading.
  • The agreements pertain to different industrial sectors like telecom, media, automobiles, IT services, etc.
  • Some of the agreements have rollback provisions and provide certainty to the taxpayers for 9 years with regard to the covered international transactions.Rollback provisions in APAs were introduced in the July 2014 Budget to provide certainty on the pricing of international transactions for 4 years (rollback years) preceding the first year from which APA becomes applicable.

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