CBDT signed 11 Advance Pricing Agreements

The Central Board of Direct Taxes department has signed 11 Advance Pricing Agreements with taxpayers overseas to reduce litigations.

Flash points

• With this India has signed totally 59 unilateral and/or bilateral agreements
• The APA was enacted in the Income tax act, 2012 and rollback provisions were provided in 2014
• The agreements cover corporate guarantees, royalty, software development services, IT enabled services and trading
• Sectors– Telecom, Media, Automobiles, IT services
• So far, 580 applications have been received and half of them were in need of rollback provisions

Terms to be Known

APA

• It is a pact between taxpayers and the IT department on an appropriate transfer pricing methodology for determining the value of assets and ensuing taxes on intra-group overseas transactions

Unilateral APA

• It is a agreement signed between the Indian tax authorities and an MNC

Bilateral APA

• It is similar to unilateral APA but it also includes the participation of the government in which the overseas company is located

Rollback provisions

• It provides certainty on the pricing of international transactions for four years (rollback years) preceding the first year from which APA becomes applicable