Transfer Pricing Current Affairs

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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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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