CBDT signs advance pricing agreements with two more MNCs

06 August 2015

The Central Board of Direct Taxes (CBDT) signed unilateral advance pricing agreements (APAs) on 3 August with two multi-national companies (MNCs),
including the first APA with a "rollback'' provision, as part of its initiative to usher in certainty in taxation.

With this the number of APAs that CBDT has so far signed total 14, which include 13 unilateral APAs and one bilateral APA.

These APAs relate to various sectors like telecommunication, oil exploration, pharmaceuticals, finance, banking, software development services and ITeS (BPOs), an official release said.

Unilateral APAs are agreed to between 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 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 the 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, which will help settle about 200 past transfer pricing disputes between the two countries in IT and ITeS segments.

So far, 35 disputes have been resolved and another 100 are likely to be resolved in the next three months, according to a CBDT release.

The framework agreement with the US opens the door for signing of bilateral APA with the US.

The MAP programmes with other countries like Japan and the 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, it added.

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