THE Central
Board of Direct Taxes (CBDT) entered into 20 Unilateral Advance Pricing
Agreements (APAs) yesterday and today, with Indian taxpayers. Many of these
agreements also have a “Rollback” provision in them.
The APA Scheme was introduced in the Income-tax Act in 2012 and the Rollback
provisions were introduced in 2014. The scheme 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
for the maximum of five future years. Further, the taxpayer has the option to
rollback the APA for four preceding years. Since its inception, the APA scheme
has attracted tremendous interest among Multi National Enterprises (MNEs) and
that has resulted in more than 700 applications (both unilateral and bilateral)
having been filed in just four years.
The 20 APAs signed in these two days pertain to various sectors of the economy
like Information Technology, Banking & Finance, Insurance, Human Resources,
Pharmaceutical, Solar Energy, Oil & Gas, Foods & Beverages, Telecommunications
and NGO. The international transactions covered in these agreements include Software
development services, IT enabled services, Investment advisory services, KPO
services, Contract manufacture, Contract R&D services, Import of components,
Support services, Export of goods, Management services, Brand Royalty, Technical
services, Engineering design services, Selling & Marketing services, Network
operation & maintenance services, General & Administration services,
HR consultancy services, etc.
With these signings, the total number of APAs entered into by the CBDT has reached
98. This includes 4 bilateral APAs and 94 unilateral APAs. A total of 33 unilateral
APAs and 1 bilateral APA have already been concluded in five months of the current
Financial Year as against 55 in F.Y. 2015-16. The CBDT expects more APAs to be
concluded and signed in the near future.
The progress of the APA Scheme strengthens the Government’s commitment to foster
a non-adversarial tax regime. The approach and functioning of the officers in
the APA teams have been appreciated and acknowledged by the industry in India
and abroad.
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