CBDT signed 11 unilateral Advance Pricing Agreements

The Central Board of Direct Taxes (CBDT) on 28 March 2016 signed 11 unilateral Advance Pricing Agreements (APAs). With this, India entered into 59 unilateral/bilateral APAs.

The APA programme was introduced by the Finance Act, 2012 to provide a predictable and non-adversarial tax regime and to reduce litigation in the Indian transfer pricing regime. 50 of these agreements were signed in the financial year 2015-16.

Highlights of the Agreements

• It covers a range of international transactions, including corporate guarantees, royalty, software development services, IT enabled services and trading.

• It pertains to different industrial sectors like telecom, media, automobiles, IT services, and others. 

• Some of the agreements have rollback provisions and provide certainty to the taxpayers for 9 years with regard to the covered international transactions.

Rollback provisions in APAs were introduced in the July 2014 Budget to provide certainty on the pricing of international transactions for 4 years (rollback years) preceding the first year from which APA becomes applicable. With the notification of Rollback rules in March 2015, the taxpayer has been provided the option to choose certainty in transfer pricing matters with the Government for a total of nine years (5 future years and 4 prior years).

Since the notification of the APA scheme on 30 August 2012, approximately 580 applications for APAs have been received and about half of these contain a request for the Rollback provisions. The number of applications is indicative of the wide international and national appreciation of the India’s APA programme’s ability to address complex transfer pricing issues in a fair and transparent manner.

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