Transfer Pricing Current Affairs

CBDT inks 9 Advance Pricing Agreements

The Central Board of Direct Taxes (CBDT) has entered into 9 Unilateral Advance Pricing Agreements (UAPAs) with Indian taxpayers in July, 2017. With this, total number of APAs signed till date stands at 171 (Bilateral-12 and Unilateral-159).

The nine APAs signed pertain to diverse sectors of the economy including Oil & Gas exploration, education, banking, pharmaceutical, manufacturing and IT. They also cover international transactions and provision of software development services, ITES , engineering design services, distribution, contract manufacturing, etc.

About Advance Pricing Agreements (APA)

The APA Scheme was introduced in the Income-tax (IT) Act. It endeavours to provide certainty to taxpayers in the domain of transfer pricing by specifying the methods of pricing and determining the Arm’s Length Price of international transactions in advance. It aims to strengthen the Government’s commitment to foster a non-adversarial tax regime. Further, the taxpayer has the option to roll back the APA. The roll back provisions under the scheme were introduced in 2014. APA provides total of nine years of tax certainty including four year term of rollback.

About Central Board of Direct Taxes (CBDT)

CBDT is nodal policy-making body of the Income Tax (IT) department under the Union Finance Ministry. It is a statutory authority established under The Central Board of Revenue Act, 1963. It is supreme body in India for framing policies related to direct taxes. The composition of CBDT includes Chairman and six members.

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Government notifies third Protocol amending India-Singapore DTAA

The Union Finance Ministry has notified hird Protocol amending India-Singapore Double Taxation Avoidance Agreement (DTAA). The agreement came into force in February 2017and was signed in December 2016.

The Third Protocol amends the DTAA between both countries to provide for source-based taxation of capital gains arising on sale of shares in a company.

Key Facts

  • The India-Singapore DTAA at present provides for residence-based taxation of capital gains of shares in a company.
  • The addition of provision of source-based taxation of capital gains in DTAA, will help to curb revenue loss, prevent double non-taxation and streamline the flow of investments.
  • It also provides certainty to investors, investments in shares made before April 1, 2017 subject to fulfilment of conditions in Limitation of Benefits clause as per 2005 Protocol.
  • Further, it also provides a two-year transition period from April 1, 2017 to March 31, 2019 during which capital gains on shares will be taxed in source country at half the normal tax rate.
  • It also facilitates relieving of economic double taxation in transfer pricing cases. It is a taxpayer-friendly measure and is in line with India’s commitments under Base Erosion and Profit Shifting (BEPS) Action Plan.
  • It also enables application of domestic law and measures concerning prevention of tax avoidance or tax evasion.

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