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CBDT inks 10 more Advance Pricing Agreements

The Central Board of Direct Taxes (CBDT) has entered into 10 more Advance Pricing Agreements (APAs) pertaining to various sectors of economy like Telecom, Banking & Finance, Pharmaceutical, Steel, Retail and IT etc

It includes 7 Unilateral APAs, 2 Bilateral APAs with the United Kingdom and Japan. Seven of these Agreements have Rollback provisions in them.

With this, the total number of APAs entered into by the CBDT has reached 140. It includes 130 Unilateral APAs and 10 Bilateral APAs. In current FY 2016-17, 76 APAs (61 Unilateral and 7 Bilateral APAs) were signed.

About Advance Pricing Agreements (APAs) scheme

  • The Union Government had introduced the APA Scheme in the Income-tax Act in 2012 and the “Rollback” provisions were introduced to it in 2014.
  • The scheme endeavours to provide certainty to taxpayers in domain of transfer pricing issues by specifying the methods of pricing and setting the prices of international transactions in advance.
  • The progress of APA Scheme appreciated nationally and internationally strengthens Government’s resolve of fostering a non-adversarial tax regime in a fair and transparent manner.

Transfer pricing: It is referred to the fixing of the price for goods and services sold in transactions between related legal subsidiaries (entities of a big company) based in different countries within an enterprise. It affects cash flow, investment decisions and performance indicators from a multinational company point of view. It affects the amounts paid as corporate tax to the Government.

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CBDT signs four unilateral Advance Pricing Agreements  

The Central Board of Direct Taxes (CBDT) under the Department of Revenue, Union Ministry of Finance has entered into four more unilateral Advance Pricing Agreements (APAs).

These four APAs are related to Manufacturing, Financial and Information Technology sectors. They cover international transactions such as Contract Manufacturing, Software Development Services and IT Enabled Services.

With this, the total number of APAs entered into by the CBDT has reached 130. It includes 122 Unilateral APAs and 8 bilateral APAs. In the current financial year (2016-17), total 66 APAs (5 bilateral APAs and 61 unilateral APAs) were signed.

About Advance Pricing Agreements (APAs)

The APA Scheme was introduced in the Income-tax (IT) Act in to provide certainty to taxpayers in domain of transfer pricing by specifying methods of pricing and determining prices of international transactions in advance. The Rollback provisions under this scheme were introduced in 2014. The scheme seeks to foster government’s aim of non-adversarial tax regime.

Benefits: (i) Boost to economy and ease of doing business.  (ii) Strengthen Government’s mission of fostering a non-adversarial tax regime. (iii) Introduces certainty in tax law by reducing compliance costs and make tax regime investment friendly. (iv) Provides certainty to taxpayers regarding transfer pricing to avoid disputes between taxpayer and tax regulator.

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CBDT inks Bilateral Advance Pricing Agreement

The Central Board of Direct Taxes (CBDT) has entered into a Bilateral Advance Pricing Agreement (BAPA) on the with Indian subsidiary of a Japanese trading company.

Earlier, CBDT also had modified an existing Bilateral APA with another Indian subsidiary of a Japanese company to include rollback provisions. Thus, total three BAPAs have been signed by CBDT with Indian subsidiaries of Japanese companies all including rollbacks. With this total number of BAPAs entered into by CBDT is now eight.

What is Advance Pricing Agreement (APA)?

The APA Scheme was introduced in the Income Tax (IT) Act, 1961 in 2012 and the provisions related to rollback were introduced in 2014. It strengthens Government’s mission of fostering a non-adversarial tax regime.  It endeavours to provide certainty to taxpayers in the domain of transfer pricing by specifying the methods of pricing and setting the prices of international transactions in advance. Under BAPA, certainty in tax treatment is provided for the next 5 years while rollback provides dispute redressal for a maximum of four past years preceding APA years.

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