Transfer Pricing Current Affairs

Government inks 16 APAs in March 2018

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.

Key Facts

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.

Significance

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.

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CBDT signs 2 more APAs with taxpayers

The Central Board of Direct Taxes (CBDT) has signed two more advance pricing agreements (APAs) in September 2017 with Indian taxpayers in order to reduce litigation by providing certainty in transfer pricing.

The two signed APAs pertain to automobile and healthcare consulting sectors. They include provision of IT enabled services (ITES), provision of software development services and provision of engineering design services.

With this, total number of APAs entered into by CBDT till date has reached 177. This includes 164 unilateral APAs and 13 bilateral APAs. So far, in current financial year, total of 25 APAs (2 bilateral and 23 unilateral) were signed.

Advance Pricing Agreements (APAs)

CBDT’s APA scheme aims to provide certainty to taxpayers in domain of transfer pricing by specifying methods of pricing and setting prices of international transactions in advance. It helps in determining arm’s length price of international transactions in advance for maximum period of five future years.

The APA provisions were introduced in Income Tax Act in 2012 and `rollback` provision to pull out of it was introduced in 2014. Its objective is to strengthen government`s resolve of fostering non-adversarial tax regime. Under Bilateral APA, certainty in tax treatment is provided for next 5 years while rollback provides dispute redressal for maximum of four past years preceding APA years.

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