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.
- 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.