CBDT signs 20 Unilateral Advance Pricing Agreements with Indian taxpayers

The Central Board of Direct Taxes (CBDT) has entered into 20 Unilateral Advance Pricing Agreements (APAs) with Indian taxpayers. Many of these agreements also have a “Rollback” provision in them.

• The 20 APAs signed 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 and Import of components 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.

 About APA:

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 setting the prices of international transactions in advance.
• The taxpayer has the option to rollback the APA for four preceding years.
• Since its inception, the APA scheme has attracted tremendous interest and that has resulted in more than 700 applications having been filed in just four years.

What is an advance pricing agreement?

An APA, usually for multiple years, is signed between a taxpayer and the tax authority (CBDT) on an appropriate transfer pricing methodology for determining the price and ensuing taxes on intra-group overseas transactions.