Taxation Current Affairs - 2019
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The Central Board of Direct Taxes (CBDT) has entered into 14 Unilateral Advance Pricing Agreements (UAPA) and 2 Bilateral Advance Pricing Agreements (BAPA) in March 2018. The 2 bilateral APAs were entered into with US . With the signing of these Agreements, CBDT has entered total 219 APAs. This includes 199 Unilateral APAs and 20 Bilateral APAs. Of this, 67 APAs (58 Unilateral and 9 Bilateral) were signed in FY 2017-18.
The 16 APAs entered into during March, 2018 pertain to various sectors of economy like Information Technology, Telecommunication, Pharmaceutical, Automobile, Beverage, Trading, Manufacturing and Banking, Finance and Insurance.
The international transactions covered under them include payment of royalty fee, provision of corporate guarantee, business support services, marketing support services, engineering design services, engineering support services, contract manufacturing, merchanting trade of agro commodity, import/export of components, provision of IT services, ITES, investment advisory services, availing of technical services, etc.
Advance Pricing Agreement (APA) Scheme
The APA scheme launched by Government endeavours to provide certainty to taxpayers in domain of transfer pricing by specifying methods of pricing and setting prices of international transactions in advance. Its provision was introduced in Income-tax Act, 1961 in 2012 and Rollback provisions to it were introduced in 2014.
The scheme aims to strengthen Government’s resolve of fostering non-adversarial tax regime. It has significantly contributed towards improving ease of doing business in India and has been appreciated nationally and internationally for being able to address complex transfer pricing issues in a fair and transparent manner.
APA gives certainty to MNCs that agree on certain principles in valuation of their cross-border transactions. They also provide assessees with alternate dispute resolution mechanism with respect to transfer pricing. It helps in determining arm’s length price of international transactions in advance for maximum period of five future years.
The Union Cabinet has given its approval for revision existing Double Taxation Avoidance Agreement (DTAA) between India and Qatar. The purpose of revision is for avoidance of double taxation and for prevention of fiscal evasion with respect to taxes on income. The existing DTAA between India and Qatar was signed in April 1999 and came into force in January, 2000. The
Features of Revised DTAA
- It updates provisions for exchange of information to latest standard. It includes Limitation of Benefits (LOB) provision to prevent treaty shopping and aligns other provisions with India’s recent treaties.
- It meets minimum standards on treaty abuse under Action 6 and Mutual Agreement Procedure under Action 14 of G-20 OECD Base Erosion & Profit Shifting (BEPS) Project to which India is participating.
Under it, a resident of third country invests by taking advantage of fiscal treaty between India and another contracting state. This has greatly contributed in encouraging FDI in country but has been medium of tax evasion. The roots of Treaty shopping are in inconsistencies among international tax regimes. If there is dissimilarity of tax systems, it can lead to distortion of investment flows. It can be controlled by introduction of limitation of benefit clause (LOB) and other clauses which limit benefits to residents of two countries only.