IN a bid to speed up the APA regime, the CBDT
has entered
into two unilateral Advance Pricing Agreements (APAs) early this week
with two Multi-National Companies (MNCs) which includes the first APA with
a “Rollback” provision. With
this, the CBDT has so far signed 14 APAs of which 13 are unilateral APAs
and one is a bilateral APA. The 14 APAs signed relate to various sectors
like telecommunication, oil exploration, pharmaceuticals, finance/banking,
software development services and ITeS (BPOs).
Unilateral APAs are agreed between Indian taxpayers and the CBDT, without
involvement of the tax authorities of the country where the associated enterprise
is based. Bilateral APAs include agreements between the tax authorities of
the two countries. An APA with the “Rollback” provision extends tax certainty
for nine financial years as against five years in APAs without “Rollback”.
APAs settle transfer prices and the methods of setting prices of international
transactions in advance. The Government is committed to conclude a large
number of APAs to foster an environment of tax cooperation and certainty.
Currently, a number of unilateral as well as bilateral APAs with Competent
Authorities of UK and Japan etc are at advanced stage of negotiations.
A Framework Agreement was recently signed with United States under the Mutual
Agreement Procedure (MAP) provision of the India-US Double Taxation Avoidance
Convention (DTAC). This is a major positive development. About 200 past transfer
pricing disputes between the two countries in Information Technology (Software
Development) Services [ITS] and Information Technology enabled Services [ITeS]
segments are expected to be resolved under this Agreement during the current
year. So far, 35 disputes have been resolved and another 100 are likely to
be resolved in the next three months.
The Framework Agreement with the US opens the door for signing of bilateral
APA with the US. The MAP programs with other countries like Japan and UK
are also progressing very well with regular meetings and resolution of past
disputes. These initiatives will go a long way in providing stable tax environment
to foreign investors doing business in India.
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